Commodity Prices, Interest Rates and the Dollar

By Q. Akram. 2009

539 citations recorded by the source corpus.

This paper sheds light on recent fluctuations in commodity prices. We investigate whether a decline in real interest rates and the US dollar contributes to higher commodity prices, and whether commodity prices display overshooting behavior in response to changes in real interest rates. We analyze the behavior of real prices of crude oil, food, metals and industrial raw materials. The analysis is based on structural VAR models estimated on quarterly data over the period 1990q1-2007q4. Our results suggest that commodity prices increase significantly in response to reductions in real interest rates. Moreover, oil prices and prices of industrial raw materials tend to display overshooting behavior in response to such interest rate changes. The evidence also suggests that a weaker dollar leads to higher commodity prices. Shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in commodity prices.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/68825eab649e181daeb86c1051f9e99ad8c9a6ed

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Citations in the corpus

Dynamic spillovers between commodity and currency markets (2015, background): “However, whether prices of other assets will eventually increase depends on the strength of the substitution relative to the income effect (Akram, 2009). The latter stems from an increase in real investment expenditure due to the initial price increase, thus making commodity investors to reduce the ”
Risk factors in oil and gas industry returns: International evidence (2011, background): “…+ ui;t : ð4Þ 8 These measures have been frequently used to measure the impact of oil on macroeconomic variables and more recently stock market indices (see, e.g. Aloui and Jammazi, 2009; Cobo-Reyes and Quirós, 2005; Cologni and Manera, 2008; Cong et al., 2008; Cuñado and Garcia, 2003; Park and…”
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).”
Oil Prices, Exchange Rates and Emerging Stock Markets (2011, unknown): “Akram (2009) also finds that a weaker dollar leads to higher commodity prices.”
Oil, Gold, US dollar and Stock market interdependencies: A global analytical insight (2017, background): “More recent evidence on this effect can be found in Bodenstein et al. (2011), Jean-Pierre Allegret et al., (2014), amongst others.”
The impact of oil shocks on exchange rates: A Markov-switching approach (2016, methodology): “On the other hand, Akram (2009) applies a structural VAR model and finds instead that a weaker (real) US dollar leads to higher real oil prices in the period 1990 to 2007.”
Interaction between oil and US dollar exchange rate: nonlinear causality, time-varying influence and structural breaks in volatility (2018, methodology): “Akram (2009) found that the depreciation of the USD triggered an increase in crude oil prices, and shocks in the USD exchange rate were capable of explaining fluctuations in crude oil prices. Employing the cointegration technique, the Granger causality test and the DCC-GARCH model, Shengxiang., Qian”
Long memory and structural breaks in modeling the return and volatility dynamics of precious metals (2012, background): “…prices as well as nonlinearities, asymmetries and other distributional characteristics such as time-varying conditional moments, volatility clustering and long-persistence of commodity price returns (Sa-3 dorsky, 2006; Agnolucci, 2009; Akram, 2009; Lescaroux, 2009; Browne and Cronin, 2010).”
Global commodity cycles and linkages: a FAVAR approach (2011, unknown): “Third, US dollar fluctuations may drive commodity prices (Akram 2009; Breitenfellner and Crespo Cuaresma 2008): as commodities are commonly invoiced in US dollars, commodity exporters may wish to stabilise their purchasing power by raising prices in periods of US dollar weakness. On the demand side,”
Conditional dependence structure between oil prices and exchange rates: A copula-GARCH approach (2013, background): “dollar exchange rates following a rise in the price of oil (e.g., Narayan et al., 2008; Zhang et al., 2008; Akram, 2009; Wu et al., 2012).”
The Role of Speculation in Oil Markets: What Have We Learned So Far? (2013, background): “There also is evidence of increased correlation between returns in foreign exchange and returns on oil (see, e.g., Akram 2009).”
The Great Plunge in Oil Prices: Causes, Consequences, and Policy Responses (2015, unknown): “2008; and Akram 2009). Frankel (2014) argues that the role of U.”