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Common dynamics of nonenergy commodity prices and their relation to uncertainty

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  • Pilar Poncela
  • Eva Senra
  • Lya Paola Sierra

Abstract

The purpose of this article is to improve the empirical evidence on commodity prices in various dimensions. First, we attempt to identify the extent of comovements in 44 monthly nonenergy commodity price series in order to ascertain whether the increase in comovement is a recent term phenomenon. Second, we attempt to determine the role of uncertainty in determining comovements among nonenergy prices in the short run. We diagnose the overall comovement using a dynamic factor model estimated by principal components. A factor-augmented vector autoregressive approach is used to assess the relationship of fundamentals, financial and uncertainty variables with the comovement in commodity prices. We find a greater synchronization among raw materials since December 2003. Since that date, uncertainty has played an important role in determining short-run fluctuations in nonenergy raw material prices.

Suggested Citation

  • Pilar Poncela & Eva Senra & Lya Paola Sierra, 2014. "Common dynamics of nonenergy commodity prices and their relation to uncertainty," Applied Economics, Taylor & Francis Journals, vol. 46(30), pages 3724-3735, October.
  • Handle: RePEc:taf:applec:v:46:y:2014:i:30:p:3724-3735
    DOI: 10.1080/00036846.2014.939377
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    1. repec:spr:annopr:v:260:y:2018:i:1:d:10.1007_s10479-017-2659-0 is not listed on IDEAS
    2. repec:spr:empeco:v:53:y:2017:i:1:d:10.1007_s00181-016-1158-5 is not listed on IDEAS
    3. Francisco Corona & Pilar Poncela & Esther Ruiz, 2017. "Determining the number of factors after stationary univariate transformations," Empirical Economics, Springer, vol. 53(1), pages 351-372, August.
    4. repec:bpj:glecon:v:18:y:2018:i:4:p:9:n:4 is not listed on IDEAS
    5. repec:eco:journ1:2017-04-03 is not listed on IDEAS
    6. repec:spr:empeco:v:53:y:2017:i:3:d:10.1007_s00181-016-1162-9 is not listed on IDEAS
    7. repec:col:000152:015779 is not listed on IDEAS
    8. repec:bla:agecon:v:48:y:2017:i:1:p:15-27 is not listed on IDEAS
    9. Byrne, Joseph P & Sakemoto, Ryuta & Xu, Bing, 2017. "Commodity Price Co-movement: Heterogeneity and the Time Varying Impact of Fundamentals," MPRA Paper 80791, University Library of Munich, Germany.

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