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Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S

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  • Matthias Gubler

    ()
    (Faculty of Business and Economics, University of Basel, Switzerland)

  • Matthias S. Hertweck

    ()
    (Department of Economics, University of Konstanz, Germany)

Abstract

This paper develops a 9-dimensional SVAR to investigate the sources of the U.S. business cycle. We extend the standard set of identified shocks to include unexpected changes in commodity prices. Our main result is that commodity price shocks are a very important driving force of macroeconomic fluctuations, second only to investment-specific technology shocks. In particular, we find that commodity price shocks explain a large share of cyclical movements in inflation. Neutral technology shocks and monetary policy shocks seem less relevant at business cycle frequencies. The impulse response dynamics provide support for medium-scale DSGE models, but not for strong price rigidities.

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Bibliographic Info

Paper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2011-03.

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Length: 43 pages
Date of creation: 25 Mar 2011
Date of revision:
Handle: RePEc:knz:dpteco:1103

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Keywords: business cycles; commodity price shocks; structural VAR;

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Cited by:
  1. Gospodinov, Nikolay & Jamali, Ibrahim, 2013. "Monetary policy surprises, positions of traders, and changes in commodity futures prices," Working Paper 2013-12, Federal Reserve Bank of Atlanta.
  2. Radoslaw Kurach, 2012. "Stocks, Commodities and Business Cycle Fluctuations – Seeking the Diversification Benefits," Equilibrium, Uniwersytet Mikolaja Kopernika, vol. 7, pages 101-116.
  3. Jun Nagayasu, 2013. "A dynamic factor approach to domestic capital mobility," Empirical Economics, Springer, vol. 44(2), pages 685-700, April.

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