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The impact of macroeconomic uncertainty on international commodity prices: Empirical analysis based on TVAR model

Xiaofen Tan and Yongjiao Ma

China Finance Review International, 2017, vol. 7, issue 2, 163-184

Abstract: Purpose - The purpose of this paper is to empirically analyze the impact of macroeconomic uncertainty on a large sample of 19 commodity markets. Design/methodology/approach - The authors rely on Jurado Findings - The findings show that positive macroeconomic uncertainty shocks affect commodity prices returns negatively on average and the impact of macroeconomic uncertainty is generally higher in high-uncertainty states compared with low-uncertainty states. Besides, although the safe-haven role of precious metals is confirmed, energy and industrial markets are more sensitive to short-run and long-run macroeconomic uncertainty, respectively. Research limitations/implications - The findings in this study suggest that commodity prices reflect not only the level of economic fundamental but also the volatility of economic fundamental. Originality/value - This study empirically analyzes and verifies the influence of macroeconomic uncertainty not only on oil prices but also on four groups of 19 raw materials. As for the methodological issues, the authors rely on a structural threshold vector autoregressive specification for modeling commodity price returns to account for potentially different effects depending on the macroeconomic uncertainty states.

Keywords: Commodity prices; Macroeconomic uncertainty; Threshold VAR (search for similar items in EconPapers)
Date: 2017
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