Political Uncertainty and Commodity Prices

Kewei Hou, Ke Tang and Bohui Zhang
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Kewei Hou: Ohio State University
Bohui Zhang: Chinese University of Hong Kong

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Using a comprehensive sample of 87 commodities, we examine the effect of political uncertainty on commodity prices. We show that political uncertainty surrounding U.S. presidential elections has a significant negative impact on commodity prices worldwide, likely due to shrinking demand before the elections. On average, commodity prices decline by 6.4% in the quarter leading up to U.S. elections. This effect holds true for gold, and is stronger for close elections and elections during recessions. On the other hand, political uncertainty in commodity producing countries with little demand pushes commodity prices up by 5.4% in the quarter before their national elections.

JEL-codes: G12 G14 G15 G18 Q02 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-pol
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2017-25

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