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Commodity prices, money and inflation

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  • Browne, Frank
  • Cronin, David

Abstract

We argue that long run and dynamic relationships should exist between commodity prices, consumer prices and money. Using a cointegrating VAR framework and US data, our empirical analysis shows equilibrium relationships existing between money, commodity prices and consumer prices, with both commodity and consumer prices proportional to the money supply in the long run. Persistence profiles reveal commodity prices initially overshooting their new equilibrium values in response to a money supply shock. We conclude that money has to be brought into analyses of the relationship between commodity prices and consumer prices.

Suggested Citation

  • Browne, Frank & Cronin, David, 2010. "Commodity prices, money and inflation," Journal of Economics and Business, Elsevier, vol. 62(4), pages 331-345, July.
  • Handle: RePEc:eee:jebusi:v:62:y::i:4:p:331-345
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    Keywords

    Monetary policy Commodity prices Overshooting;

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