Global Money Supply and Energy and Non-Energy Commodity Prices: A MS-TV-VAR Approach

Stefano Grassi, Francesco Ravazzolo, Joaquin Vespignani and Giorgio Vocalelli

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper shows that the impact of the global money supply is disproportionally high for energy than for non-energy commodities prices. An increase in the global money supply for energy commodity prices results mostly in demand-pull inflation. However, for non-energy commodity prices, an increase in global money supply results in demand-pull inflation and cost-push inflation, as energy is a critical input for non-energy commodities. We introduce a Markov Switching framework with time-varying transition probabilities to quantify this effect. This macro-econometric model accounts for periods when the global money supply growth is slow, moderate, and fast. We find that the response to global money supply shocks is higher for energy than for non-energy commodity prices. We also find heterogeneous responses for both energy and non-energy commodities across regimes.

Keywords: Global money supply; Energy and non-energy prices; Markov-Switching VAR (search for similar items in EconPapers)
JEL-codes: C54 E31 F01 Q43 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023-02
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https://cama.crawford.anu.edu.au/sites/default/fil ... ignani_vocalelli.pdf (application/pdf)

Related works:
Working Paper: Global money supply and energy and non-energy commodity prices: A MS-TV-VAR approach (2023)
Working Paper: Global money supply and energy and non-energy commodity prices: A MS-TV-VAR approach (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2023-13

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