The Effect of Monetary Policy on Real Commodity Prices

Jeffrey Alexander Frankel ()

No 12713, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Commodity prices are back. This paper looks at connections between monetary policy, and agricultural and mineral commodities. We begin with the monetary influences on commodity prices, first for a large country such as the United States, then smaller countries. The claim is that low real interest rates lead to high real commodity prices. The theory is an analogy with Dornbusch overshooting. The relationship between real interest rates and real commodity prices is also supported empirically. One channel through which this effect is accomplished is a negative effect of interest rates on the desire to carry commodity inventories. The paper concludes with a consideration of implications for monetary policy.

JEL-codes: E4 E5 F3 Q0 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-cba, nep-mac and nep-mon
Date: Written
Note: ME
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nber.org/papers/w12713.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.

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: http://EconPapers.repec.org/RePEc:nbr:nberwo:12713

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w12713
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc
Address: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Contact information at EDIRC.
Series data maintained by ().