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Commodity Price Co-movement: Heterogeneity and the Time Varying Impact of Fundamentals

Listed author(s):
  • Byrne, Joseph P
  • Sakemoto, Ryuta
  • Xu, Bing

This paper extends the topical literature on the co-movement and determinants of primary commodity prices, by considering heterogeneity in commodities and time variation in the impact of fundamentals. We account for heterogeneity by employing a dynamic hierarchical factor model, which decomposes commodities into global and sectoral factors. Using a time varying parameter factor augmented VAR model, we shock global and sector-specific factors over time. We present plausible impulse responses to demand shocks, real interest rate shocks, and to elevated risks during the global financial crisis. We also identify that materials, food and metals respond heterogeneously to these shocks.

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File URL: https://mpra.ub.uni-muenchen.de/80791/1/MPRA_paper_80791.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 80791.

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Date of creation: 12 Jul 2017
Handle: RePEc:pra:mprapa:80791
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