Global commodity prices and macroeconomic fluctuations in a low interest rate environment
Rashad Ahmed
Energy Economics, 2023, vol. 127, issue PB
Abstract:
This paper takes a multi-country perspective to investigate the macroeconomic consequences of recessionary demand shocks when interest rates are low. Global demand shocks are recovered from a global commodity price factor that is shown to be highly representative of global demand conditions. Country-specific adjustments to these global commodity-based demand shocks are then estimated across 17 advanced economies using non-linear VARs. Domestic real GDP growth, equity returns, and inflation are significantly more sensitive to these shocks when nominal interest rates fall below a threshold of about 3%. When interest rates are low, recessionary commodity demand shocks lead to higher domestic real interest rates as nominal policy rates become constrained by the zero lower bound, consistent with a deflation trap driving the increase in domestic sensitivity to global shocks.
Keywords: Zero lower bound; Commodities; Monetary policy; Business cycles (search for similar items in EconPapers)
JEL-codes: E30 E44 E52 F44 Q43 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0140988323006126
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pb:s0140988323006126
DOI: 10.1016/j.eneco.2023.107114
Access Statistics for this article
Energy Economics is currently edited by R. S. J. Tol, Beng Ang, Lance Bachmeier, Perry Sadorsky, Ugur Soytas and J. P. Weyant
More articles in Energy Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).