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Monetary Factors in the Long-Run Co-movement of Consumer and Commodity Prices

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  • Michael S. Hanson

    ()
    (Economics Department, Wesleyan University)

Abstract

This paper estimates a structural VAR model of U.S. consumer and world commodity prices. An equiproportional long-run response of nominal price levels to amonetary shock yields identifying restrictions. Exogenous innovations to monetary policy account for a sizable share of the co-movement of these series, including during episodes more commonly attributed to “supply shocks.”

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File URL: http://repec.wesleyan.edu/pdf/mshanson/2004001_hanson.pdf
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Bibliographic Info

Paper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2004-001.

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Length: 17 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:wes:weswpa:2004-001

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Related research

Keywords: Commodity price determination; vector autoregression; long-run restrictions; co-integration; monetary shocks;

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References

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  1. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 462, Board of Governors of the Federal Reserve System (U.S.).
  2. Matthew D. Shapiro & Mark W. Watson, 1988. "Sources of Business Cycle Fluctuations," NBER Working Papers 2589, National Bureau of Economic Research, Inc.
  3. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  4. 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.
  5. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, Elsevier, vol. 36(5), pages 975-1000, June.
  6. Mussa, Michael, 1982. "A Model of Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 90(1), pages 74-104, February.
  7. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-01, C.V. Starr Center for Applied Economics, New York University.
  8. Hanson, Michael S., 2004. "The "price puzzle" reconsidered," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(7), pages 1385-1413, October.
  9. Rogers, John H., 1999. "Monetary shocks and real exchange rates," Journal of International Economics, Elsevier, Elsevier, vol. 49(2), pages 269-288, December.
  10. Fred Furlong, 1989. "Commodity prices and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun16.
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