IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v96y2014i5p1455-1468..html

What Drives Commodity Prices?

Author

Listed:
  • Shu-Ling Chen
  • John D. Jackson
  • Hyeongwoo Kim
  • Pramesti Resiandini

Abstract

This article examines common forces that drive the prices of 51 tradable commodities. We demonstrate that highly persistent movements of these prices are mostly due to the first common component, which is closely related to the U.S. nominal exchange rate. In particular, our simple factor-based model outperforms the random walk model in out-of-sample forecast for the U.S. exchange rate. The second common factor and de-factored idiosyncratic components are consistent with stationarity, implying short-lived deviations from the equilibrium price dynamics. In concert, these results provide an intriguing resolution to the apparent inconsistency that arises from stable markets with nonstationary prices.

Suggested Citation

  • Shu-Ling Chen & John D. Jackson & Hyeongwoo Kim & Pramesti Resiandini, 2014. "What Drives Commodity Prices?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1455-1468.
    • Handle: RePEc:oup:ajagec:v:96:y:2014:i:5:p:1455-1468.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/ajae/aau014
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or

    for a different version of it.

    Other versions of this item:

    More about this item

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:96:y:2014:i:5:p:1455-1468.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.