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Effects of Global Liquidity on Commodity and Food Prices

  • Ansgar Belke


  • Ingo Bordon
  • Ulrich Volz

This paper investigates the relationship between global liquidity and commodity and food prices applying a global cointegrated vector-autoregressive model. We use different measures of global liquidity and various indices of commodity and food prices for the period 1980–2011. Our results support the hypothesis that there is a positive long-run relation between global liquidity and the development of food and commodity prices, and that food and commodity prices adjust significantly to this cointegrating relation. Global liquidity, in contrast, does not adjust, it drives the relationship.

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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 0323.

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Length: 28 pages
Date of creation: Mar 2012
Date of revision:
Handle: RePEc:rwi:repape:0323
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  1. Ansgar Belke & Ingo G. Bordon & Torben W. Hendricks, 2009. "Global Liquidity and Commodity Prices: A Cointegrated VAR Approach for OECD Countries," Discussion Papers of DIW Berlin 898, DIW Berlin, German Institute for Economic Research.
  2. Sousa, Joao Miguel & Zaghini, Andrea, 2007. "Global monetary policy shocks in the G5: A SVAR approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(5), pages 403-419, December.
  3. Akito Matsumoto, 2011. "Global Liquidity: Availability of Funds for Safe and Risky Assets," IMF Working Papers 11/136, International Monetary Fund.
  4. Rasmus Ruffer & Livio Stracca, 2007. "What is global excess liquidity, and does it matter?," Money Macro and Finance (MMF) Research Group Conference 2006 120, Money Macro and Finance Research Group.
  5. Matteo Ciccarelli & Benoît Mojon, 2007. "Global Inflation," Kiel Working Papers 1337, Kiel Institute for the World Economy.
  6. Modena, Matteo, 2011. "Agricultural commodities and financial markets," MPRA Paper 36416, University Library of Munich, Germany, revised 30 Sep 2011.
  7. David Hendry & Jurgen Doornik, 2000. "Constructing Historical Euro-Zone Data," Economics Series Working Papers 4, University of Oxford, Department of Economics.
  8. Christopher L. Gilbert, 2010. "How to Understand High Food Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 61(2), pages 398-425.
  9. Trostle, Ronald, 2008. "Factors Contributing to Recent Increases in Food Commodity Prices (PowerPoint)," Seminars 43902, USDA Economists Group.
  10. Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
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