 Commodity prices and the US money supply in the long runSamih Antoine Azar International Journal of Trade and Global Markets, 2012, vol. 5, issue 3/4, 316-335 Abstract: Theoretically commodity prices are expected to overshoot the money supply in the short run but to vary with unit proportionality in the long run. This follows from the observation that consumer prices are sticky and that commodity prices, set in auction markets are fully flexible. There is empirical evidence in the literature that commodity indexes are indeed anchored in the long run to the money supply with unit proportionality. However there is a dearth of research on the long-run behaviour of individual commodities with respect to the money supply. This paper fills this gap in the literature. When 48 individual commodity series and six commodity indexes series are studied over the monthly period 1980/2011, there is fairly strong evidence for unit proportionality to money supply. Individual regressions and panel regressions are both supportive of unit proportionality. The preconception that commodity prices move haphazardly is hence rejected. Keywords: commodity price indexes; individual commodity prices; USA; United States; money supply; long-run proportionality; unit root tests; co-integration; error-correction models; long-run adjustment speed; panel unit root tests; panel co-integration. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ids:ijtrgm:v:5:y:2012:i:3/4:p:316-335 Access Statistics for this article More articles in International Journal of Trade and Global Markets from Inderscience Enterprises Ltd |
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