ECB Monetary Policy and Commodity Prices

Shahriyar Aliyev and Evžen Kočenda

No 2020/8, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: We analyze the impact of the ECB monetary policies on global aggregate and sectoral commodity prices using monthly data from January 2001 till August 2019. We employ a SVAR model and assess separately period of conventional monetary policy before global financial crisis (GFC) and unconventional monetary policy during post-crisis period. Our key results indicate that contractionary monetary policy shocks have positive effects on the aggregate and sectoral commodity prices during both conventional and unconvetional monetary policy periods. The effect is statistically significant for aggregate commodity prices during post-crisis period. In terms of sectoral impact, the effect is statistically significant for food prices in both periods and for fuel prices during post-crisis period; other commodities display positive but statistically insignificant responses. Further, we demonstrate that the impact of the ECB monetary policy on commodity prices increased remarkably after the GFC. Our results also suggest that the effect of the ECB monetary policy on commodity prices does not transmit directly through market demand and supply expectations channel, but rather through the exchange rate channel that influences the European market demand directly.

Keywords: European Central Bank; commodity prices; short-term interest rates; unconventional monetary policy; Structural Vector Autoregressive model; exchange rates. (search for similar items in EconPapers)
JEL-codes: C54 E43 E58 F31 G15 Q02 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2020-04, Revised 2020-04
New Economics Papers: this item is included in nep-agr, nep-cba, nep-eec, nep-mac, nep-mon and nep-ore
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Related works:
Journal Article: ECB monetary policy and commodity prices (2023)
Working Paper: ECB monetary policy and commodity prices (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2020_08

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