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Monetary policy and price dynamics in a commodity futures market

Author

Listed:
  • Tai, Meng-Yi
  • Chao, Chi-Chur
  • Hu, Shih-Wen
  • Lai, Ching-Chong
  • Wang, Vey

Abstract

Using a general-equilibrium framework, this paper examines the price dynamics of a monetary shock for a small open economy with commodity spot and futures markets. The agricultural spot price can fall by exhibiting a mis-adjustment at the instant of the announcement of the increase in the money supply under certain conditions. Accordingly, the price of agricultural futures can fall at the instant of the policy announcement but it eventually increases to a new equilibrium level when the policy is implemented.

Suggested Citation

  • Tai, Meng-Yi & Chao, Chi-Chur & Hu, Shih-Wen & Lai, Ching-Chong & Wang, Vey, 2014. "Monetary policy and price dynamics in a commodity futures market," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 372-379.
    • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:372-379
    DOI: 10.1016/j.iref.2013.06.007
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    References listed on IDEAS

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    Cited by:

    1. Yang Liu & Liyan Han & Libo Yin, 2018. "Does news uncertainty matter for commodity futures markets? Heterogeneity in energy and non‐energy sectors," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(10), pages 1246-1261, October.
    2. Shih-Wen Hu & Li-Ju Chen & Vey Wang & Meng-Yi Tai & Lee-Jung Lu & Chiu-Yue Lin, 2015. "Energy Policies and Food Prices," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 11(1), pages 47-68, January.
    3. Stephanos Papadamou & Vasilios Sogiakas, 2018. "The informational content of unconventional monetary policy on precious metal markets," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 37(1), pages 16-36, January.
    4. Libo Yin & Jing Nie & Liyan Han, 2020. "Intermediary asset pricing in commodity futures returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(11), pages 1711-1730, November.
    5. Shang, Hua & Yuan, Ping & Huang, Lin, 2016. "Macroeconomic factors and the cross-section of commodity futures returns," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 316-332.

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    More about this item

    Keywords

    Commodity spot price; Futures price; Monetary shock;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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