Interest rate dynamics and commodity prices

Christophe Gouel, Qingyin Ma and John Stachurski

Journal of Economic Theory, 2024, vol. 222, issue C

Abstract: In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the sign and magnitude of interest rate effects. Purely empirical studies struggle to address these issues because of the complex interactions between interest rates, prices, supply changes, and aggregate demand. To move this debate to a solid footing, we extend the competitive storage model to include stochastically evolving interest rates. We establish general conditions for existence and uniqueness of solutions and provide a systematic theoretical and quantitative analysis of the interactions between interest rates and prices.

Keywords: Commodity prices; Time-varying interest rate; Competitive storage (search for similar items in EconPapers)
JEL-codes: C62 C63 E43 E52 G12 Q02 (search for similar items in EconPapers)
Date: 2024
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Related works:
Working Paper: Interest Rate Dynamics and Commodity Prices (2024)
Working Paper: Interest Rate Dynamics and Commodity Prices (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:222:y:2024:i:c:s0022053124001212

DOI: 10.1016/j.jet.2024.105915

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