Investigating properties of commodity price responses to real and nominal shocks
Hyeongwoo Kim () and
The North American Journal of Economics and Finance, 2020, vol. 51, issue C
This paper studies dynamic adjustments of 49 world commodity prices in response to innovations in the nominal exchange rate and the world real GDP. After we estimate the dynamic elasticity of the prices with respect to these shocks, we obtain the kernel density of our estimates to establish stylized facts on the adjustment process of the commodity price toward a new equilibrium path. Our empirical findings imply, on average, that the law of one price holds in the long-run, whereas the substantial degree of short-run price rigidity was observed in response to the nominal exchange rate shock. The real GDP shock tends to generate substantial price fluctuations in the short-run because adjustments of the supply can be limited, but have much weaker effects in the long-run as the supply eventually counterbalances the increase in the demand. Overall, we report persistent long-lasting effects of the nominal exchange rate shock on commodity prices relative to those of the real GDP shock.
Keywords: Commodity prices; Price stickiness; Dynamic elasticity; Vector autoregression; Impulse-response function; Kernel density; E31; F31; Q02 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Investigating Properties of Commodity Price Responses to Real and Nominal Shocks (2018)
Working Paper: Investigating Properties of Commodity Price Responses to Real and Nominal Shocks (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818305151
Access Statistics for this article
The North American Journal of Economics and Finance is currently edited by Hamid Beladi
More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().