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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. Rogers, John H., 1999. "Monetary shocks and real exchange rates," Journal of International Economics, Elsevier, vol. 49(2), pages 269-288, December.
  2. Fred Furlong, 1989. "Commodity prices and inflation," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun16.
  3. Jon Faust & Eric M. Leeper, 1994. "When do long-run identifying restrictions give reliable results?," Working Paper 94-2, Federal Reserve Bank of Atlanta.
  4. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules And Macroeconomic Stability: Evidence And Some Theory," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 147-180, February.
  5. Christopher A. Sims, 1992. "Interpreting the Macroeconomic Time Series Facts: The Effects of Monetary Policy," Cowles Foundation Discussion Papers 1011, Cowles Foundation for Research in Economics, Yale University.
  6. Mussa, Michael, 1982. "A Model of Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 90(1), pages 74-104, February.
  7. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters, in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
  8. Robert B. Barsky & Lutz Kilian, 2001. "Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative," NBER Working Papers 8389, National Bureau of Economic Research, Inc.
  9. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  10. Hanson, Michael S., 2004. "The "price puzzle" reconsidered," Journal of Monetary Economics, Elsevier, vol. 51(7), pages 1385-1413, October.
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