US Monetary Policy and Commodity Sector Prices

This study examines the effects of the monetary policy of the United States on commodity prices. Using a Bayesian Structural VAR, we identify the interest rate shocks as a measure of the stance of the U.S. mon- etary policy and evaluate their impacts on different types of commodity prices. The empirical evidence suggests that a U.S. monetary contraction has a negative and significant effect on the aggregate commodi- ty prices, which takes place with a substantial lag (i.e., eight quarters after the shock). However, the ag- gregate response masks the existence of significant heterogeneity in the responses of the different types of commodities. More specifically, a positive interest rate (contractionary) shock leads to: i) an initial in- crease in the prices of non-fuel commodities, which later reverts path and becomes negative (as in the case of the prices of agricultural raw materials); ii) a positive and persistent rise in the food prices; iii) a fall in the beverage prices; and iv) a persistent reduction in the prices of metals and the prices of fuel (en- ergy) prices.