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The effect of inflation on real commodity prices

Listed author(s):
  • Reicher, Christopher Phillip
  • Utlaut, Johannes Friederich
Registered author(s):

    Recent research has shown that economic conditions have an important effect on real commodity prices. We quantify the contribution of fluctuations in inflation to this particular link. In the data, a temporary rise in inflation causes real commodity prices to rise, as does a rise in trend inflation. We find that a simple dynamic equilibrium model of commodity supply and demand gives a realistic response of real commodity prices to inflation. Based on historical simulations, shocks to inflation played an important role in commodity price dynamics during the 1970s, but they have contributed negligibly to commodity price movements since then.

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    File URL: https://www.econstor.eu/bitstream/10419/45904/1/661649679.pdf
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    Paper provided by Kiel Institute for the World Economy (IfW) in its series Kiel Working Papers with number 1704.

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    Date of creation: 2011
    Handle: RePEc:zbw:ifwkwp:1704
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