Global Liquidity and Commodity Prices

Hyunju Kang (), Bok-Keun Yu () and Jongmin Yu ()
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Bok-Keun Yu: Micro & Institutional Economics Team, Economic Research Institute, The Bank of Korea
Jongmin Yu: Hongik University

No 2015-14, Working Papers from Economic Research Institute, Bank of Korea

Abstract: While monetary easing in major economies and the greater participation of financial institutions in commodity trading have enhanced the financialization of commodity markets since the global financial crisis, this paper empirically investigates whether the impact of global liquidity on commodity prices has grown since the crisis. For the agricultural products, energy and metals sectors, this paper uses a structural vector autoregression model of commodity supply, demand and prices with global liquidity to address the short-run relationship between global liquidity and commodity prices. The key finding is that the effect of global liquidity has been more pronounced for energy and metals commodity prices since the global financial crisis. This paper also suggests a price-based liquidity measure has a greater explanatory power for the commodity price dynamics than commonly-used monetary aggregates in the post-crisis period.

Keywords: Commodity prices; Global liquidity; Structural vector autoregression (search for similar items in EconPapers)
JEL-codes: C32 E31 F42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2015-05-20
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http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2015-14.pdf Working Paper, 2015 (application/pdf)

Related works:
Journal Article: Global Liquidity and Commodity Prices (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1514

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