The Effect of Monetary Policy on Real Commodity Prices
AbstractCommodity prices are back. This paper looks at connections between monetary policy, and agricultural and mineral commodities. We begin with the monetary influences on commodity prices, first for a large country such as the United States, then smaller countries. The claim is that low real interest rates lead to high real commodity prices. The theory is an analogy with Dornbusch overshooting. The relationship between real interest rates and real commodity prices is also supported empirically. One channel through which this effect is accomplished is a negative effect of interest rates on the desire to carry commodity inventories. The paper concludes with a consideration of implications for monetary policy.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12713.
Date of creation: Dec 2006
Date of revision:
Publication status: published as Jeffrey A. Frankel. "The Effect of Monetary Policy on Real Commodity Prices," in John Y. Campbell, editor, "Asset Prices and Monetary Policy" University of Chicago Press (2008)
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- Jeffrey A. Frankel, 2008. "The Effect of Monetary Policy on Real Commodity Prices," NBER Chapters, in: Asset Prices and Monetary Policy, pages 291-333 National Bureau of Economic Research, Inc.
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- F3 - International Economics - - International Finance
- Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-AGR-2006-12-16 (Agricultural Economics)
- NEP-ALL-2006-12-16 (All new papers)
- NEP-CBA-2006-12-16 (Central Banking)
- NEP-MAC-2006-12-16 (Macroeconomics)
- NEP-MON-2006-12-16 (Monetary Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
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by Menzie Chinn in Econbrowser on 2012-07-26 15:35:17
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