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Commodity price co-movement: heterogeneity and the time-varying impact of fundamentals
[Oil price shocks and the stock market: evidence from Japan]

Author

Listed:
  • Joseph P Byrne
  • Ryuta Sakemoto
  • Bing Xu

Abstract

This paper extends the topical literature on the co-movement and determinants of primary commodity prices, by considering heterogeneity in commodities and time variation in the impact of fundamentals. We account for heterogeneity by employing a dynamic hierarchical factor model, which decomposes commodities into global and sectoral factors. Using a time-varying parameter factor augmented VAR model, we shock global and sector-specific factors over time. We present plausible impulse responses to demand shocks, real interest rate shocks and to elevated risks during the global financial crisis. We also identify that agricultural raw materials, food and metals respond heterogeneously to these shocks.

Suggested Citation

  • Joseph P Byrne & Ryuta Sakemoto & Bing Xu, 2020. "Commodity price co-movement: heterogeneity and the time-varying impact of fundamentals [Oil price shocks and the stock market: evidence from Japan]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 47(2), pages 499-528.
    • Handle: RePEc:oup:erevae:v:47:y:2020:i:2:p:499-528.
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    File URL: http://hdl.handle.net/10.1093/erae/jbz017
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    Cited by:

    1. Zhang, Tianding & Zeng, Song, 2023. "Dynamic comovement and extreme risk spillovers between international crude oil and China's non-ferrous metal futures market," Resources Policy, Elsevier, vol. 80(C).
    2. Semeyutin, Artur & Gozgor, Giray & Lau, Chi Keung Marco & Xu, Bing, 2021. "Effects of idiosyncratic jumps and co-jumps on oil, gold, and copper markets," Energy Economics, Elsevier, vol. 104(C).
    3. World Bank, 2024. "Commodity Markets Outlook, October 2024," World Bank Publications - Books, The World Bank Group, number 42219, April.
    4. Roberto Esposti, 2025. "Investigating commodity price interdependence with Granger causality networks," Working Papers 498, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    5. Esposti, Roberto, 2021. "On the long-term common movement of resource and commodity prices.A methodological proposal," Resources Policy, Elsevier, vol. 72(C).
    6. Qian, Chenqi & Zhang, Tianding & Li, Jie, 2023. "The impact of international commodity price shocks on macroeconomic fundamentals: Evidence from the US and China," Resources Policy, Elsevier, vol. 85(PB).
    7. Sek, Siok Kun, 2019. "Unveiling the factors of oil versus non-oil sources in affecting the global commodity prices: A combination of threshold and asymmetric modeling approach," Energy, Elsevier, vol. 176(C), pages 272-280.
    8. Esposti, Roberto, 2024. "Dating common commodity price and inflation shocks with alternative approaches," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 13(2), July.
    9. Byrne, Joseph P. & Sakemoto, Ryuta, 2025. "Commodity correlation risk," Journal of Commodity Markets, Elsevier, vol. 38(C).
    10. Roberto Esposti, 2022. "Who Moves First? Commodity Price Interdependence Through Time-Varying Granger Causality," Working Papers 471, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item

    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G1 - Financial Economics - - General Financial Markets

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