US Monetary Policy and Commodity Sector Prices

Shawkat Hammoudeh, Duc Khuong Nguyen and Ricardo Sousa

No 2014-438, Working Papers from Department of Research, Ipag Business School

Abstract: This study examines the effects of the monetary policy of the United States on commodity prices. Using a Bayesian Structural VAR, we identify the interest rate shocks as a measure of the stance of the U.S. mon- etary policy and evaluate their impacts on different types of commodity prices. The empirical evidence suggests that a U.S. monetary contraction has a negative and significant effect on the aggregate commodi- ty prices, which takes place with a substantial lag (i.e., eight quarters after the shock). However, the ag- gregate response masks the existence of significant heterogeneity in the responses of the different types of commodities. More specifically, a positive interest rate (contractionary) shock leads to: i) an initial in- crease in the prices of non-fuel commodities, which later reverts path and becomes negative (as in the case of the prices of agricultural raw materials); ii) a positive and persistent rise in the food prices; iii) a fall in the beverage prices; and iv) a persistent reduction in the prices of metals and the prices of fuel (en- ergy) prices.

Keywords: monetary policy; commodity prices; Bayesian Structural VAR. (search for similar items in EconPapers)
JEL-codes: E37 E52 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2014-01-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (18)

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