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Co-movements in commodity prices: A note based on network analysis

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  • David Matesanz Gomez
  • Guillermo J. Ortega
  • Benno Torgler
  • German Dabat

Abstract

This paper analyses co-movements in a wide group of commodity prices during the time period 1992-2010. Our methodological approach is based on the correlation matrix and the networks inside. Through this approach we are able to summarize global interaction and interdependence, capturing the existing heterogeneity in the degrees of synchronization between commodity prices. Our results produce two main findings: (a) we do not observe a persistent increase in the degree of co-movement of the commodity prices in our time sample, however from mid-2008 to the end of 2009 co-movements almost doubled when compared with the average correlation; (b) we observe three groups of commodities which have exhibited similar price dynamics (metals, oil and grains and oilseeds) and which have increased their degree of co-movement during the sampled period. These results suggest that speculation and uncertainty are drivers of the sharp slump in commodity prices synchronization.

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Bibliographic Info

Paper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2011-21.

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Date of creation: Oct 2011
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Handle: RePEc:cra:wpaper:2011-21

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Keywords: commodity prices; co-movement; hierarchy and topology; networks; complex systems;

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  1. Labys, W. C. & Achouch, A. & Terraza, M., 1999. "Metal prices and the business cycle," Resources Policy, Elsevier, vol. 25(4), pages 229-238, December.
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  14. David Matesanz Gomez & Guillermo J. Ortega & Benno Torgler, 2011. "Measuring Globalization: A hierarchical network approach," School of Economics and Finance Discussion Papers and Working Papers Series 267, School of Economics and Finance, Queensland University of Technology.
  15. Isabel Vansteenkiste, 2009. "How Important are Common Factors in Driving Non-Fuel Commodity Prices? A Dynamic Factor Analysis," Working Paper Series 1072, European Central Bank.
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  18. R. Mantegna, 1999. "Hierarchical structure in financial markets," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 11(1), pages 193-197, September.
  19. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
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