Interest Rate Dynamics and Commodity Prices

Christophe Gouel, Qingyin Ma and John Stachurski

Papers from arXiv.org

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.

Date: 2023-08, Revised 2024-09
New Economics Papers: this item is included in nep-des and nep-mon
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http://arxiv.org/pdf/2308.07577 Latest version (application/pdf)

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Working Paper: Interest Rate Dynamics and Commodity Prices (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2308.07577

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