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Monetary policy and world commodity markets: 2000-2007

Author

Listed:
  • Hossein Askari

    (George Washington University, Washington (DC))

  • Noureddine Krichene

    (International Monetary Fund, Washington (DC))

Abstract

Expansionary monetary policy in key industrial countries and a rapidly depreciating US dollar sent commodity prices soaring at unprecedented rates during 2003–2007. In contrast, consumer price indices in major OECD countries, a leading indicator for monetary policy, showed almost no inflation. This twin development is a puzzle as the evolution of consumer prices were not responsive to record low interest rates, doubledigit commodity inflation, and a sharp depreciation of the dollar. A common trend, identified as a monetary shock, drives commodity prices. Policymakers face a policy dilemma: maintain expansionary monetary policy stance with persistent commodity price inflation, subsequent severe world recession, and financial disorder, or tighten monetary policy with subsequent sustained economic growth and financial and price stability.

Suggested Citation

  • Hossein Askari & Noureddine Krichene, 2010. "Monetary policy and world commodity markets: 2000-2007," PSL Quarterly Review, Economia civile, vol. 63(253), pages 145-177.
    • Handle: RePEc:psl:pslqrr:2010:24
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9433/9328
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    References listed on IDEAS

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    Cited by:

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    2. Athanassios Petralias & Pródromos Prodromídis, 2015. "Price discovery under crisis: uncovering the determinant factors of prices using efficient Bayesian model selection methods," Empirical Economics, Springer, vol. 49(3), pages 859-879, November.

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    More about this item

    Keywords

    Monetary Policy; Asset Inflation; Commodity Prices;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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