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Commodity Price Uncertainty as a Leading Indicator of Economic Activity

Athanasios Triantafyllou (), Dimitrios Bakas () and Marilou Ioakimidis ()
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Athanasios Triantafyllou: Essex Business School, University of Essex, UK
Marilou Ioakimidis: University of Peloponnese, Greece; Department of Economics, National and Kapodistrian University of Athens, Greece

Working Paper series from Rimini Centre for Economic Analysis

Abstract: In this paper we examine the impact of commodity price uncertainty on US economic activity. Our empirical analysis indicates that uncertainty in agricultural, metals and energy markets depresses US economic activity and acts as an early warning signal for US recessions with a forecasting horizon ranging from one to twelve months. The results reveal that uncertainty shocks in agricultural and metals markets are more significant for the US macroeconomy when compared to 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 response to energy uncertainty shocks is significantly reduced due to either systematic policy reactions or random shocks in monetary policy.

Keywords: Volatility; Commodity Prices; Economic Recession; Economic Activity (search for similar items in EconPapers)
JEL-codes: C32 E27 F37 G17 Q02 Q43 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-agr and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:19-03

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