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Global commodity cycles and linkages: a FAVAR approach

  • Marco Lombardi

    ()

  • Chiara Osbat

    ()

  • Bernd Schnatz

    ()

In this article, we examine linkages across non-energy commodity price developments by means of a factor-augmented VAR model (FAVAR). From a set of non-energy commodity price series, we extract two factors, which we identify as common trends in metals and food prices. These factors are included in a FAVAR model together with selected macroeconomic variables, which have been associated with developments in commodity prices. Impulse response functions confirm that exchange rates and economic activity affect individual non-energy commodity prices, but we fail to find strong spillovers from oil to non-oil commodity prices or an impact of the interest rate. In addition, we find that individual commodity prices are affected by common trends captured by the food and metals factors. Copyright Springer-Verlag 2012

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File URL: http://hdl.handle.net/10.1007/s00181-011-0494-8
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Article provided by Springer in its journal Empirical Economics.

Volume (Year): 43 (2012)
Issue (Month): 2 (October)
Pages: 651-670

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Handle: RePEc:spr:empeco:v:43:y:2012:i:2:p:651-670
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