Advanced Search
MyIDEAS: Login

Does Monetary Policy Respond to Commodity Price Shocks?

Contents:

Author Info

  • Ano Sujithan, Kuhanathan
  • Koliai, Lyes
  • Avouyi-Dovi, Sanvi

Abstract

Commodity prices, especially oil prices, peaked in the aftermath of the financial crisis of 2007 and they have remained highly volatile. All things being equal, the increase in commodity prices may induce a similar tendency of inflation and hence become a monetary policy issue. However, the impact of the changes of commodity prices on inflation is not clear. In this paper, by using Markov-switching models we show that there is an implicit impact of commodity markets on short-term interest rates for a set of heterogeneous countries (the U.S., the Euro area, Brazil, India, Russia and South Africa) over the period from January 1999 to August 2012. Besides, the VAR models reveal that short-term interest rates respond to commodity volatility shocks whatever the country. Moreover, the linkage between commodity markets and monetary policy instruments is stronger since the recent financial crisis.

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://basepub.dauphine.fr/xmlui/bitstream/123456789/11718/1/192-1789-1-PB.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/11718.

as in new window
Length:
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:dau:papers:123456789/11718

Contact details of provider:
Web page: http://www.dauphine.fr/en/welcome.html
More information through EDIRC

Related research

Keywords: Markov - switching; Commodity prices; VAR models; Monetary Policy;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Jean-Marc Natal, 2010. "Monerary Policy Response to Oil Price Shocks," Working Papers 2010-15, Swiss National Bank.
  2. Susanne M. Polley & Raymond E. Lombra, 1999. "Commodity Prices, Interest Rate Spreads and the Exchange Rate: Useful Monetary Policy Indicators or Redundant Information?," Eastern Economic Journal, Eastern Economic Association, vol. 25(2), pages 129-140, Spring.
  3. Christopher Erceg & Luca Guerrieri & Steven B. Kamin, 2011. "Did Easy Money in the Dollar Bloc Fuel the Oil Price Run-Up?," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 131-160, March.
  4. Anton Nakov & Andrea Pescatori, 2010. "Monetary Policy Trade-Offs with a Dominant Oil Producer," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(1), pages 1-32, 02.
  5. Robert E. Hall, 1982. "Introduction to "Inflation: Causes and Effects"," NBER Chapters, in: Inflation: Causes and Effects, pages 1-10 National Bureau of Economic Research, Inc.
  6. Peter Ferderer, J., 1996. "Oil price volatility and the macroeconomy," Journal of Macroeconomics, Elsevier, vol. 18(1), pages 1-26.
  7. Andrew Ang & Geert Bekaert, 1998. "Regime Switches in Interest Rates," NBER Working Papers 6508, National Bureau of Economic Research, Inc.
  8. Kilian, Lutz & Lewis, Logan, 2009. "Does the Fed Respond to Oil Price Shocks?," CEPR Discussion Papers 7594, C.E.P.R. Discussion Papers.
  9. Bodenstein, Martin & Guerrieri, Luca & Kilian, Lutz, 2012. "Monetary policy responses to oil price fluctuations," CEPR Discussion Papers 8928, C.E.P.R. Discussion Papers.
  10. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
  11. Shigeyuki Hamori, 2007. "The information role of commodity prices in formulating monetary policy: some evidence from Japan," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-7.
  12. José De Gregorio & Oscar Landerretche & Christopher Neilson, 2007. "Another Pass-Through Bites The Dust? Oil Prices And Inflation," Working Papers wp238, University of Chile, Department of Economics.
  13. Alessio Anzuini & Marco J. Lombardi & Patrizio Pagano, 2012. "The impact of monetary policy shocks on commodity prices," Temi di discussione (Economic working papers) 851, Bank of Italy, Economic Research and International Relations Area.
  14. Engemann, Kristie M. & Kliesen, Kevin L. & Owyang, Michael T., 2011. "Do Oil Shocks Drive Business Cycles? Some U.S. And International Evidence," Macroeconomic Dynamics, Cambridge University Press, vol. 15(S3), pages 498-517, November.
  15. Robert B. Barsky & Lutz Kilian, 2002. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 137-198 National Bureau of Economic Research, Inc.
  16. Mork, Knut Anton, 1989. "Oil and Macroeconomy When Prices Go Up and Down: An Extension of Hamilton's Results," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 740-44, June.
  17. Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
  18. Filardo, Andrew J, 1994. "Business-Cycle Phases and Their Transitional Dynamics," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 299-308, July.
  19. Loungani, Prakash, 1986. "Oil Price Shocks and the Dispersion Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 536-39, August.
  20. Gisser, Micha & Goodwin, Thomas H, 1986. "Crude Oil and the Macroeconomy: Tests of Some Popular Notions: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 95-103, February.
  21. Bodenstein, Martin & Erceg, Christopher J. & Guerrieri, Luca, 2008. "Optimal monetary policy with distinct core and headline inflation rates," Journal of Monetary Economics, Elsevier, vol. 55(Supplemen), pages S18-S33, October.
  22. 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.
  23. Harry Bloch & A. Michael Dockery & David Sapsford, 2006. "Commodity Prices and the Dynamics of Inflation in Commodity-Exporting Nations: Evidence from Australia and Canada," The Economic Record, The Economic Society of Australia, vol. 82(s1), pages S97-S109, 09.
  24. Renee Fry & Callum Jones & Christopher Kent, 2010. "Inflation in an Era of Relative Pirce Shocks," CAMA Working Papers 2010-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  25. Hooker, Mark A., 1996. "What happened to the oil price-macroeconomy relationship?," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 195-213, October.
  26. Robert E. Hall, 1982. "Inflation: Causes and Effects," NBER Books, National Bureau of Economic Research, Inc, number hall82-1.
Full references (including those not matched with items on IDEAS)

Citations

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:dau:papers:123456789/11718. 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: (Alexandre Faure).

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.