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Modeling dynamics of metal price series via state space approach with two common factors

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  • Golosnoy, Vasyl
  • Rossen, Anja

Abstract

In this paper we model the dynamics of 100 years long monthly price series of eight non-ferrous and precious metals. Applying the state space framework we impose and identify two common factors related to non-ferrous and precious metals, respectively, which exhibit quite distinct autoregressive dynamics. The preferred two common factor specifications outperform single common factor approaches which are usually used in the current literature. Furthermore, we provide interpretation for the extracted common factors by investigating their exposure to the major macroeconomic fundamentals.

Suggested Citation

  • Golosnoy, Vasyl & Rossen, Anja, 2014. "Modeling dynamics of metal price series via state space approach with two common factors," HWWI Research Papers 156, Hamburg Institute of International Economics (HWWI).
    • Handle: RePEc:zbw:hwwirp:156
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    2. Galán-Gutiérrez, Juan Antonio & Labeaga, José M. & Martín-García, Rodrigo, 2023. "Cointegration between high base metals prices and backwardation: Getting ready for the metals super-cycle," Resources Policy, Elsevier, vol. 81(C).

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    More about this item

    Keywords

    state space models; Kalman filter; non-ferrous metals; precious metals;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F00 - International Economics - - General - - - General

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