Primary commodity prices: Co-movements, common factors and fundamentals

Joseph Byrne, Giorgio Fazio and Norbert Fiess

Journal of Development Economics, 2013, vol. 101, issue C, 16-26

Abstract: The behavior of commodities is critical for developing and developed countries alike. This paper contributes to the empirical evidence on the co-movement and determinants of commodity prices. Using nonstationary panel methods, we document a statistically significant degree of co-movement due to a common factor. Within a Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by a simple asset pricing model, are both found to be negatively related to this common factor. This evidence is robust to the inclusion of demand and supply shocks, which both positively impact on the co-movement of commodity prices.

Keywords: Commodity prices; Panel estimation; Factor models (search for similar items in EconPapers)
JEL-codes: E30 F00 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (130)

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Related works:
Working Paper: Primary commodity prices: co-movements, common factors and fundamentals (2011)
Working Paper: Primary commodity prices: co-movements, common factors and fundamentals (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:101:y:2013:i:c:p:16-26

DOI: 10.1016/j.jdeveco.2012.09.002

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