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Price effects of steel commodities on worldwide stock market returns

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  • Gutierrez, Juan P.
  • Vianna, Andre C.

Abstract

We analyze the price effects of steel commodities on stock market returns in emerging and developed economies. These commodities have recently attained increased media exposure due to the rise in the U.S. steel import tariffs, which pose the threat of reducing global demand for steel products and, consequently, lowering prices abroad. However, little has been investigated on the impact of steel commodity prices on worldwide stock market returns. By performing structural VAR and GARCH techniques on a weekly-frequency time series from 2002 to 2015, we find positive and statistically significant effects of linear and non-linear steel commodity price shocks on real stock returns in the commodity markets. In the highly diversified financial markets such as U.S. and Germany, real stock returns do not significantly respond to steel commodity price shocks, although we find highly significant positive responses from developed economies such as Australia, Japan and South Korea. Results are robust to different model specifications. Our evidence suggests that higher tariffs on steel imports represent a larger disadvantage to commodity markets which are more largely impacted by steel commodity prices. We provide economic policy implications based on recent literature.

Suggested Citation

  • Gutierrez, Juan P. & Vianna, Andre C., 2020. "Price effects of steel commodities on worldwide stock market returns," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
  • Handle: RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818301451
    DOI: 10.1016/j.najef.2018.09.007
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    More about this item

    Keywords

    Commodities; Import tariffs; Stock market; Time-series models; Trade policy; WTO;
    All these keywords.

    JEL classification:

    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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