What Drives Commodity Prices?
Hyeongwoo Kim () and
Pramesti Resiandini ()
No auwp2010-05, Auburn Economics Working Paper Series from Department of Economics, Auburn University
This paper examines common forces driving the prices of 51 highly tradable commodities. We demonstrate that highly persistent movements of these prices are mostly due to the first common component, which is closely related to the US nominal exchange rate. In particular, our simple factor-based model outperforms the random walk model in out-of-sample forecast for the US exchange rate. The second common factor and de-factored idiosyncratic components are consistent with stationarity, implying short-lived deviations from the equilibrium price dynamics. In concert, these results provide an intriguing resolution to the apparent inconsistency arising from stable markets with nonstationary prices.
Keywords: Commodity Prices; US Nominal Exchange Rate; PANIC; Cross-Section Dependence; Out-of-Sample Forecast (search for similar items in EconPapers)
JEL-codes: C53 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-for and nep-opm
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Journal Article: What Drives Commodity Prices? (2014)
Working Paper: What Drives Commodity Prices? (2013)
Working Paper: What Drives Commodity Prices? (2012)
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:abn:wpaper:auwp2010-05
Access Statistics for this paper
More papers in Auburn Economics Working Paper Series from Department of Economics, Auburn University Contact information at EDIRC.
Bibliographic data for series maintained by Hyeongwoo Kim ().