Does the volatility of commodity prices reflect macroeconomic uncertainty ?

M. Jo Ts, Valérie Mignon () and Tovonony Razafindrabe
Authors registered in the RePEc Author Service: Marc Joëts

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: C32 E32 Q02 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... g-paper_607_2016.pdf (application/pdf)

Related works:
Journal Article: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2017)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2017)
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)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2015)
Working Paper: Does the volatility of commodity prices reflect macroeconomic uncertainty? (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:607

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().