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Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach

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  • Ratti, Ronald A.
  • Vespignani, Joaquin L.

Abstract

This paper investigates the influence of liquidity in the major developed and major developing ‎economies on commodity prices. Unanticipated increases in the BRIC countries’ liquidity is ‎associated with significant and persistent increases in commodity prices that are much larger ‎than the effect of unanticipated increases in G3 liquidity, and the difference increases over ‎time. Over 1999-2012 BRIC liquidity is strongly linked with global energy prices and global ‎real activity whereas G3 liquidity is not. The impact of BRIC liquidity on mineral and metal ‎prices is twice as large as that of G3 liquidity. BRIC liquidity is significantly connected with ‎global tightening while G3 liquidity is not. Granger casualty goes from liquidity to ‎commodity prices. BRIC and G3 liquidity and commodity prices are cointegrated. BRIC and ‎G3 liquidity and global output and global prices are cointegrated. We constructed a structural ‎factor-augmented error correction (SFAVEC) model.‎

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49324.

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Date of creation: 24 Aug 2013
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Handle: RePEc:pra:mprapa:49324
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Keywords: Commodity Prices; BRIC countries; G3; Global liquidity; SFAVEC;

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Find related papers by JEL classification:
  • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
  • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
  • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
  • F1 - International Economics - - Trade
  • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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Cited by:

  1. Shawkat Hammoudeh & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "China’s Monetary Policy and Commodity Prices," Working Papers 2014-298, Department of Research, Ipag Business School.
  2. Shawkat Hammoudeh & Duc Khuong Nguyen & Ricardo M. Sousa, 2014. "US Monetary Policy and Commodity Sector Prices," Working Papers 2014-438, Department of Research, Ipag Business School.

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