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Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach

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Author Info

  • Ratti, Ronald A

    ()
    (School of Business, University of Western Sydney Author-Workplace Homepage:http://www.uws.edu.au/sob/school_of_business)

  • Vespignani, Joaquin L.

    ()
    (School of Economics and Finance, University of Tasmania)

Abstract

This paper investigates the influence of liquidity in the major developed and major developing economies on commodity prices. Unanticipated increases in the BRIC countries? liquidity is associated with significant and persistent increases in commodity prices that are much larger than the effect of unanticipated increases in G3 liquidity, and the difference increases over time. Over 1999-2012 BRIC liquidity is strongly linked with global energy prices and global real activity whereas G3 liquidity is not. The impact of BRIC liquidity on mineral and metal prices is twice as large as that of G3 liquidity. BRIC liquidity is significantly connected with global tightening while G3 liquidity is not. Granger casualty goes from liquidity to commodity prices. BRIC and G3 liquidity and commodity prices are cointegrated. BRIC and G3 liquidity and global output and global prices are cointegrated. We constructed a structural factor-augmented error correction (SFAVEC) model.

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File URL: http://eprints.utas.edu.au/17096/1/2013-08_Commodity_Prices_and_BRIC_and_G3_Liquidity_A_SFAVEC_Approach_(Final).pdf
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Bibliographic Info

Paper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 17096.

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Length: 31 pages
Date of creation: 09 Jan 2013
Date of revision: 09 Jan 2013
Publication status: Published by the University of Tasmania. Discussion paper 2013-08
Handle: RePEc:tas:wpaper:17096

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Keywords: Commodity Prices; BRIC countries; G3; Global liquidity; SFAVEC;

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Cited by:
  1. Shawkat Hammoudeh & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "China’s Monetary Policy and Commodity Prices," Working Papers 2014-298, Department of Research, Ipag Business School.

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