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Global Liquidity and Commodity Prices – A Cointegrated VAR Approach for OECD Countries

  • Ansgar Belke

    ()

  • Ingo G. Bordon
  • Torben W. Hendricks

This paper examines the interactions between money, consumer prices and commodity prices at a global level from 1970 to 2008. Using aggregated data for major OECD countries and a cointegrating VAR framework, we are able to establish long run and short run relationships among these variables while the process is mainly driven by global liquidity. According to our empirical findings, different price elasticities in commodity and consumer goods markets can explain the recently observed overshooting of commodity over consumer prices. Although the sample period is rather long, recursive tests corroborate that our CVAR fits the data very well.

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File URL: http://repec.rwi-essen.de/files/REP_09_102.pdf
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0102.

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Length: 42 pages
Date of creation: Mar 2009
Handle: RePEc:rwi:repape:0102
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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the Flow of Funds," Working Paper Series, Macroeconomic Issues 94-2, Federal Reserve Bank of Chicago.
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  4. Schnabl, Gunther & Hoffmann, Andreas, 2007. "Monetary Policy, Vagabonding Liquidity and Bursting Bubbles in New and Emerging Markets - An Overinvestment View," MPRA Paper 5201, University Library of Munich, Germany.
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  16. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  17. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  18. Claudio E. V. Borio & Andrew Filardo, 2007. "Globalisation and inflation: New cross-country evidence on the global determinants of domestic inflation," BIS Working Papers 227, Bank for International Settlements.
  19. Allan H. Meltzer, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall.
  20. Klaas Baks & Charles Frederick Kramer, 1999. "Global Liquidity and Asset Prices; Measurement, Implications, and Spillovers," IMF Working Papers 99/168, International Monetary Fund.
  21. Hua, Ping, 1998. "On Primary Commodity Prices: The Impact of Macroeconomic/Monetary Shocks," Journal of Policy Modeling, Elsevier, vol. 20(6), pages 767-790, December.
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