Commodity Prices, Money and Inflation

By F. Browne, D. Cronin. Social Science Research Network, 2007

190 citations recorded by the source corpus.

The influence of commodity prices on consumer prices is usually seen as originating in commodity markets. We argue, however, that long run and short run relationships should exist between commodity prices, consumer prices and money and that the influence of commodity prices on consumer prices occurs through a money-driven overshooting of commodity prices being corrected over time. Using a cointegrating VAR framework and US data, our empirical findings are supportive of these relationships, with both commodity and consumer prices proportional to the money supply in the long run, commodity prices initially overshooting their new equilibrium values in response to a money supply shock, and the deviation of commodity prices from their equilibrium values having explanatory power for subsequent consumer price inflation.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/3357750d275568527a1c8bc9a9e26a68b45bb2d8

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In Economics and Econometrics

Citations in the corpus

Liquidity and the Dynamic Pattern of Asset Price Adjustment: A Global View (2010, background): “Moreover, as argued by Browne and Cronin (2007), the price adjustment process in commodity markets is relatively fast because participants are more equally empowered with more balanced information and resources than their consumer goods counterparts.”
Volatility forecasting and risk management for commodity markets in the presence of asymmetry and long memory (2014, background): “real sector, financial sector, and economic growth of national economy (e.g., Hamilton, 1996; Holmes and Wang, 2003; Cologni and Manera, 2009; Browne and Cronin, 2010).”
Long memory and structural breaks in modeling the return and volatility dynamics of precious metals (2012, background): “However, only a few attempts have studied the dynamics and distributional characteristics of precious metal prices.”
Persistence of precious metal prices: A fractional integration approach with structural breaks (2014, background): “A considerable number of studies have dealt with commodity price dynamics and have shown significant volatility clustering and long-persistence of commodity price returns (Browne and Cronin, 2010; Agnolucci, 2009; Akram, 2009; Lescaroux, 2009; Sadorsky, 2006).”