U.S. MONETARY POLICY, COMMODITY PRICES AND THE FINANCIALIZATION HYPOTHESIS

Papa Gueye Fam (), Rachida Hennani () and Nicolas Huchet ()
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Papa Gueye Fam: Bureau d’Economie Théorique et Appliquée (BETA) UMR 7522, University of Lorraine, Nancy Cedex, France
Nicolas Huchet: Laboratoire d’Economie Appliquée au Développement(LEAD), University of Toulon, Toulon, France

Review of Economic and Business Studies, 2017, issue 20, 53-77

Abstract: Many studies point out the growing correlations within financial markets, while others highlight the financialization of commodity markets. The purpose of this article is to revisit the relationships between various financial assets and commodity markets by taking into account the U.S. monetary policy and therefore the implementation of non-standard measures. In addition to oil, stock and bond markets, U.S. policy rates and a great deal of agricultural prices have been over time considered through a DCC-GARCH model, between 1995-2015. We find that agricultural markets uphold the financialization hypothesis, implying an increase in market-prices’ correlations and so raises the question of agricultural prices’ drivers. Interestingly, conditional correlations between the U.S. monetary policy and agricultural prices have decreased since 2010, which indicates that the implementation of non-standard monetary policy measures reduces spillover effects on asset prices, especially raw commodities. Such a result in turn highlights changing relationships between monetary, financial and physical markets, in a context of very weak policy rates over a long period.

Keywords: monetary policy, Agricultural commodities, Financialization, Volatility; Correlation, DCC-MGARCH; Asymmetric causality (search for similar items in EconPapers)
JEL-codes: C22 C61 E52 G15 Q02 Q14 (search for similar items in EconPapers)
Date: 2017
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Working Paper: U.S. MONETARY POLICY, COMMODITY PRICES AND THE FINANCIALIZATION HYPOTHESIS (2017)
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