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Global money supply and energy and non-energy commodity prices: A MS-TV-VAR approach

Author

Listed:
  • Stefano Grassi

    (Department of Economics and Finance, University of Rome Tor Vergata, Italy)

  • Francesco Ravazzolo

    (@ Department of Data Science and Analytics, BI Norwegian Business School, Norway; Faculty of Economics, Free University of Bozen-Bolzano, Italy)

  • Joaquin Vespignani

    (Tasmanian School of Business and Economics, University of Tasmania, Australia; Centre for Applied Macroeocnomics Analysis, ANU, Australia)

  • Giorgio Vocalelli

    (Department of Economics, University of Verona, Italy)

Abstract

This paper shows that the impact of the global money supply is disproportionally high for energy than for non-energy commodities prices. An increase in the global money supply for energy commodity prices results mainly in demand-pull inflation. However, for non-energy commodity prices, an increase in global money supply leads to demand-pull and cost-push inflation, as energy is a key input for non-energy commodities. To quantify this effect, we use a Markov switching model with time-varying transition probabilities. This model considers periods of slow, moderate, and fast global money supply growth. We find that the response to global money supply shocks is almost double for energy than for non-energy commodity prices. We also find heterogeneous responses for energy and non-energy commodities under different regimes.

Suggested Citation

  • Stefano Grassi & Francesco Ravazzolo & Joaquin Vespignani & Giorgio Vocalelli, 2023. "Global money supply and energy and non-energy commodity prices: A MS-TV-VAR approach," BEMPS - Bozen Economics & Management Paper Series BEMPS100, Faculty of Economics and Management at the Free University of Bozen.
    • Handle: RePEc:bzn:wpaper:bemps100
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    More about this item

    Keywords

    Global money supply; Energy and non-energy prices; Markov-Switching VAR.;
    All these keywords.

    JEL classification:

    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F01 - International Economics - - General - - - Global Outlook
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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