[The impact of stock market policy announcement on commodity prices and share prices]
It has been an important issue to analyze the possible impact of macroeconomic effects, such as: exchange rate or interest rate, on the commodity prices since 1970s because of the tremendous volatility of commodity prices on the US. Thereafter, there are a lot of literature in agricultural economics relative to the empirical study. But the results of these literature are ambiguous. On the other hand, Blandchard (1981) incorporated the stock market into the traditional IS-LM model and discussed the interaction between stock market and economy. The financial sector plays an important role to affect the time path of commodity prices it cannot be ignored since agricultural industry is just one of sector among the whole economy. The main purpose of this article is to add the stock market into the two-goods economy. One is commodity product and the other is nonagricultural product. According the model including commodity market, nonagricultural product market, monetary market and stock market and under the assumptions of perfect substitutes between stock and bond and perfect foresight expectation, the effect of stock market policies, such as financing interest rate, financing ratio, on dynamics of commodity and share prices will be analyzed. The result shows that in the long run the impact of stock policies on commodity prices depends on the relative magnitudes of price effect of commodity and interest rate effect. While in the short run, whether share price overshooting or not it depends on the length of time between announcement and implement of policies.
|Date of creation:||Dec 2007|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sayed H. Saghaian & Michael R. Reed & Mary A. Marchant, 2002. "Monetary Impacts and Overshooting of Agricultural Prices in an Open Economy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 90-103.
- Shih-wen Hu & Vey Wang, 1996. "Commodity Price Dynamics and Anticipated Shocks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 982-990.
- Choe, Young Chan & Koo, Won W., 1993. "Monetary Impacts On Prices In The Short And Long Run: Further Results For The United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(02), December.
- Orden, David, 1986. "Money and Agriculture: The Dynamics of Money Financial Market-Agricultural Trade Linkages," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 3.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
- J. S. Taylor & John Spriggs, 1989. "Effects of the Monetary Macro-economy on Canadian Agricultural Prices," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 278-289, May.
- Michael T. Belongia, 1991. "Monetary policy and the farm/nonfarm price ratio: a comparison of effects," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 30-46.
- Bordo, Michael David, 1980. "The Effects of Monetary Change on Relative Commodity Prices and the Role of Long-Term Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1088-1109, December.
- Aoki, Masanao, 1985. "Misadjustment to anticipated shocks: an example of exchange-rate response," Journal of International Money and Finance, Elsevier, vol. 4(3), pages 415-420, September.
- Gavin, Michael, 1989. "The stock market and exchange rate dynamics," Journal of International Money and Finance, Elsevier, vol. 8(2), pages 181-200, June.
- Alan G. Isaac & David E. Rapach, 1997. "Monetary Shocks and Relative Farm Prices: A Re-examination," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1332-1339.
- Blanchard, Olivier J, 1983. "Dynamic Effects of a Shift in Savings; The Role of Firms," Econometrica, Econometric Society, vol. 51(5), pages 1583-1591, September.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:31178. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.