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Global commodity cycles and linkages a FAVAR approach

Author

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  • Lombardi, Marco J.
  • Osbat, Chiara
  • Schnatz, Bernd

Abstract

In this paper 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 a 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 of economic activity affect individual nonenergy 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. JEL Classification: E3, F3

Suggested Citation

  • Lombardi, Marco J. & Osbat, Chiara & Schnatz, Bernd, 2010. "Global commodity cycles and linkages a FAVAR approach," Working Paper Series 1170, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20101170
    Note: 261931
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    More about this item

    Keywords

    commodity prices; exchange rates; FAVAR; globalisation; Oil Price;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F3 - International Economics - - International Finance

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    This paper has been announced in the following NEP Reports:

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