Advanced Search
MyIDEAS: Login to save this paper or follow this series

Commodity prices, interest rates and the dollar

Contents:

Author Info

  • Q. Farooq Akram

    ()
    (Norges Bank (Central Bank of Norway))

Abstract

We investigate whether a decline in real interest rates and the US dollar contribute to higher commodity prices, and whether commodity prices tend to display overshooting behavior in response to changes in especially real interest rates. We analyze the behavior of a broad range of real commodity prices, i.e. real prices of crude oil, food, metals and industrial raw materials. The analysis is based on structural VAR models estimated on quarterly data over the period 1990q1–2007q4. Our results suggest that commodity prices increase significantly in response to a reduction in real interest rates. Moreover, we find that oil prices as well as metal prices tend to display overshooting behavior in response to interest rate changes. The evidence also suggests that a decline in the dollar leads to a surge in commodity prices. Shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in the commodity prices.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.norges-bank.no/en/Published/Papers/Working-Papers/2008/WP-200812/
Download Restriction: no

Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2008/12.

as in new window
Length: 33 pages
Date of creation: 20 Aug 2008
Date of revision:
Handle: RePEc:bno:worpap:2008_12

Contact details of provider:
Postal: Postboks 1179 Sentrum, 0107 Oslo
Phone: +47 22 31 60 00
Fax: +47 22 41 31 05
Email:
Web page: http://www.norges-bank.no/
More information through EDIRC

Related research

Keywords: Commodity prices; interest rates; exchange rates; VAR models;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  2. Chadha, Jagjit S & Sarno, Lucio & Valente, Giorgio, 2003. "Monetary Policy Rules, Asset Prices and Exchange Rates," CEPR Discussion Papers 4114, C.E.P.R. Discussion Papers.
  3. Menzie D. Chinn & Ron Alquist, 2006. "Conventional and Unconventional Approaches to Exchange Rate Modeling and Assessment," NBER Working Papers 12481, National Bureau of Economic Research, Inc.
  4. Hilde C. Bjørnland, 2006. "Monetary Policy and the Illusionary Exchange Rate Puzzle," Computing in Economics and Finance 2006 45, Society for Computational Economics.
  5. Jeffrey A. Frankel, 2008. "The Effect of Monetary Policy on Real Commodity Prices," NBER Chapters, in: Asset Prices and Monetary Policy, pages 291-333 National Bureau of Economic Research, Inc.
  6. Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
  7. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  8. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
  9. Noureddine Krichene, 2008. "Recent Inflationary Trends in World Commodities Markets," IMF Working Papers 08/130, International Monetary Fund.
  10. Paul Cashin & Luis Felipe Céspedes & Ratna Sahay, 2003. "Commodity Currencies and the Real Exchange Rate," Working Papers Central Bank of Chile 236, Central Bank of Chile.
  11. Q. Farooq Akram, 2004. "Oil prices and exchange rates: Norwegian evidence," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 476-504, December.
  12. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  13. Favero, Carlo A., 2001. "Applied Macroeconometrics," OUP Catalogue, Oxford University Press, number 9780198296850, September.
  14. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  15. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bno:worpap:2008_12. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.