Commodity Price Uncertainty as a Leading Indicator of Economic Activity

Dimitrios Bakas, Marilou Ioakimidis and Athanasios Triantafyllou

Essex Finance Centre Working Papers from University of Essex, Essex Business School

Abstract: In this paper we examine the impact of commodity price uncertainty on US economic activity. Our empirical analysis indicates that uncertainty in agricultural, energy and metals markets depresses US economic activity and acts as an early warning signal for US recessions. Our VAR analysis shows that uncertainty shocks in agricultural and metals markets have a more long-lasting dampening effect on US economic activity and its components, when compared to the effect of oil price uncertainty shocks. Finally, we show that when accounting for the effects of macroeconomic and monetary factors, the negative dynamic response of economic activity to agricultural and metals price uncertainty shocks remains unaltered, while the respective macroeconomic response to energy uncertainty shocks is significantly reduced due to either systematic policy reactions or random shocks in monetary policy.

Keywords: Volatility; Commodity Markets; Economic Recession; Economic Activity (search for similar items in EconPapers)
Date: 2020-04-24
New Economics Papers: this item is included in nep-mac and nep-rmg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Commodity price uncertainty as a leading indicator of economic activity (2023)
Working Paper: Commodity Price Uncertainty as a Leading Indicator of Economic Activity (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:esy:uefcwp:27361

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