Global vs Sectoral Factors and the Impact of the Financialization in Commodity Price Changes

Pilar Poncela, Eva Senra and Lya Sierra ()
Additional contact information
Eva Senra: Universidad de Alcalá

Open Economies Review, 2020, vol. 31, issue 4, No 5, 859-879

Abstract: Abstract Commodity prices influence price levels of a broad range of goods and, in the case of some developing economies, production and export activity. Therefore, information about future commodity inflation is useful for central banks, forward-looking policy-makers, and economic agents whose decisions depend on their expectations about it. After 2004, we have witnessed the so-called financialization of the commodity markets, which might induce greater communalities among commodity prices. This paper reports evidence on the relevance of the forecasting content of co-movement after 2004. With the use of large and small scale factor models we find that for the short run, in addition to dynamics, sectoral communality has relevant predictive content. For 12 months ahead, dynamics lose relevance while communality remains relevant.

Keywords: Commodity prices; Co-movement; Dynamic factor models; Global factor; Out-of-sample forecast; Sectoral factors (search for similar items in EconPapers)
JEL-codes: E37 F00 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11079-019-09564-4 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:openec:v:31:y:2020:i:4:d:10.1007_s11079-019-09564-4

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-019-09564-4

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().