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Does the volatility of commodity prices reflect macroeconomic uncertainty ?

Marc Joëts, Valérie Mignon () and Tovonony Razafindrabe

Working papers from Banque de France

Abstract: While there exists numerous studies on the macroeconomic effects of oil and commodity shocks, the literature is quite silent on the impact of macroeconomic uncertainty on oil and commodity prices and, especially, on their volatility. This paper tackles this issue through the estimation of a threshold vector autoregressive (TVAR) model on a sample of 19 commodity markets. We aim at (i) assessing whether the effect of macroeconomic uncertainty shocks on commodity price returns depends on the degree of uncertainty, and (ii) investigating the transfer from macroeconomic uncertainty to price uncertainty using a newly developed measure of commodity price uncertainty. Our findings show that both agricultural and industrial markets are highly sensitive to the variability and the level of macroeconomic uncertainty, while the impact on precious metals is more parsimonious given their well-identified safe-haven role in time of economic turmoil. In addition, we find evidence that the recent 2007-09 recession has generated an unprecedented episode of high uncertainty in numerous commodity prices. Interestingly, our analysis further reveals that volatility and uncertainty in prices can be disconnected. This is especially true for the oil market as most important shocks in the 1990s and the beginning of the 2000s that lead to price volatility do not generate price uncertainty, highlighting the relevance of our uncertainty measure in linking uncertainty to predictability rather than to volatility.

Keywords: macroeconomic uncertainty; commodity prices; threshold vector autoregressive model (search for similar items in EconPapers)
JEL-codes: Q02 E32 C32 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2) Track citations by RSS feed

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Related works:
Journal Article: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2017) Downloads
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2017)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2017) Downloads
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2016)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2016)
Working Paper: Does the volatility of commodity prices reflects macroeconomic uncertainty? (2016)
Working Paper: Does the volatility of commodity prices reflects macroeconomic uncertainty? (2016)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2015) Downloads
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2015) Downloads
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