IDEAS home Printed from https://ideas.repec.org/p/ags/eaae17/260889.html
   My bibliography  Save this paper

What Makes Commodity Prices Move Together? An Answer From A Dynamic Factor Model

Author

Listed:
  • Esposti, Roberto

Abstract

This paper aims to investigate the common movement of commodity prices. Two alternative hypotheses explaining the origin and nature of this common movement are put forward: the interdependence and the common latent factor hypotheses. This latter is assessed by specifying a DF/FAVAR model whose latent factors move around a zero-mean short-term level and a non-stationary long-run equilibrium level, respectively. Four heterogeneous and mostly unrelated commodities are considered (crude oil, copper, wheat, beef). Using IMF monthly prices over the 1980:1-2016:4 period, a Kalman Filter ML estimation is performed and results suggest that, beside the increasing price volatility, the last decade experienced a significant rise of the long-term equilibrium price. Some implications of this major result are also discussed

Suggested Citation

  • Esposti, Roberto, 2017. "What Makes Commodity Prices Move Together? An Answer From A Dynamic Factor Model," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 260889, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae17:260889
    DOI: 10.22004/ag.econ.260889
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/260889/files/What%20Makes%20Commodity%20Prices%20Move%20Together%3F%20An%20Answer%20From%20A%20Dynamic%20Factor%20Model.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/260889/files/What%20Makes%20Commodity%20Prices%20Move%20Together%3F%20An%20Answer%20From%20A%20Dynamic%20Factor%20Model.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.260889?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Christoph Schleicher, 2003. "Structural Time-Series Models with Common Trends and Common Cycles," Computing in Economics and Finance 2003 108, Society for Computational Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tara M. Sinclair, 2009. "The Relationships between Permanent and Transitory Movements in U.S. Output and the Unemployment Rate," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2‐3), pages 529-542, March.
    2. Cortez, Willy Walter & Islas C., Alejandro, 2013. "An assessment of the dynamics between the permanent and transitory components of Mexico's output and unemployment," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    3. Trenkler, Carsten & Weber, Enzo, 2016. "On the identification of multivariate correlated unobserved components models," Economics Letters, Elsevier, vol. 138(C), pages 15-18.
    4. Esa Mangeloja, 2003. "Structural testing of Business Cycles," Macroeconomics 0308004, University Library of Munich, Germany.
    5. James C. Morley, 2007. "The Slow Adjustment of Aggregate Consumption to Permanent Income," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2-3), pages 615-638, March.
    6. Mitra, Sinchan & Sinclair, Tara M., 2012. "Output Fluctuations In The G-7: An Unobserved Components Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 16(3), pages 396-422, June.
    7. James Morley & Tara M. Sinclair, 2005. "Testing for Stationarity and Cointegration in an Unobserved Components Framework," Computing in Economics and Finance 2005 451, Society for Computational Economics.
    8. Riccardo Corradini, 2005. "An Empirical Analysis of Permanent Income Hypothesis Applied to Italy using State Space Models with non zero correlation between trend and cycle," Computing in Economics and Finance 2005 28, Society for Computational Economics.
    9. Soloschenko, Max & Weber, Enzo, 2014. "Capturing the Interaction of Trend, Cycle, Expectations and Risk Premia in the US Term Structure," University of Regensburg Working Papers in Business, Economics and Management Information Systems 475, University of Regensburg, Department of Economics.
    10. Esposti, Roberto, 2021. "On the long-term common movement of resource and commodity prices.A methodological proposal," Resources Policy, Elsevier, vol. 72(C).
    11. Arabinda Basistha, 2007. "Trend-cycle correlation, drift break and the estimation of trend and cycle in Canadian GDP," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 584-606, May.

    More about this item

    Keywords

    Marketing;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ags:eaae17:260889. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/eaaeeea.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.