The Effects on Commodity Prices of Extraordinary Monetary Policy

Amatov, Aitbek; Dorfman, Jeffrey H.

doi:10.1017/aae.2016.34

Cited by 15 publications

(8 citation statements)

References 16 publications

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“…The observation span encompassed by the present study incorporates the period of the financial crisis of 2007-2008 and the subsequent takeoff of quantitative easing. The softening monetary policy has undoubtedly fueled financial markets, but the impact on commodities has been heterogenous [40]. In conjunction with the evolving architecture of commodity markets, monetary stimulus has led to precipitous financialization of commodities resulting in a growing impact of financial investors on commodity prices [41].…”

Section: Discussion Of Empirical Findingsmentioning

confidence: 99%

Algorithmic Sangfroid? The Decline of Sensitivity of Crude Oil Prices to News on Potentially Disruptive Terror Attacks and Political Unrest

2020

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The paper postulates that enhanced informational efficiency and signal processing capacity, which have characterized the evolution of commodity markets’ architecture during the last two decades, have rendered commodity prices more robust with respect to external shocks. Our econometric analysis of times series over 2001–2015 revealed a persistent decline in the responsiveness of crude oil prices to inflows of information concerning potentially supply-disruptive events. International news on terrorist attacks involving damage to oil infrastructure including those occurring in proximity to oil extraction sites, political unrest, and conflicts of rivaling factions are all documented to exercise a decreasing impact on oil price volatility both over short and medium observation spans. The previously observed spikes in oil prices accompanying similar disruptive events in OPEC countries are also shown to flatten over time as price sensitivity to information shocks declines. The discovered weakening of market response becomes more pronounced from the mid-2000s, which corresponds to the period of rapid algorithmization of commodity trading.

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Section: Discussion Of Empirical Findingsmentioning

confidence: 99%

Algorithmic Sangfroid? The Decline of Sensitivity of Crude Oil Prices to News on Potentially Disruptive Terror Attacks and Political Unrest

2020

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“…The literature studying the effects of UMPs on commodity markets is much smaller. Existing research on commodity markets usually only consider composite indices instead of individual commodity price series (Hammoudeh et al, 2015;Amatov and Dorfman, 2017;Glick and Leduc, 2012;Hayo et al, 2012). In contrast, Zhu et al (2018) and Papadamou and Sogiakas (2018) examine how the UMP implemented by the Bank of England, Bank of Japan, and the European Central Bank (ECB) affects the prices of gold and silver.…”

Section: Literaturementioning

confidence: 99%

The impact of forward guidance and large-scale asset purchase programs on commodity markets

Gomis‐Porqueras

Rafiq

Yao

2022

Studies in Nonlinear Dynamics &Amp; Econometrics

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This paper investigates how different commodity prices are affected by unconventional monetary policies (UMP) implemented by the Federal Reserve of the United States as a response to the Global Financial Crisis. We analyze impulse responses using local projections and identify UMP shocks through high-frequency identification strategy. We show that forward guidance (FG) and large-scale asset purchase (LSAP) shocks lead to distinct responses when analyzing commodity prices. We find that asset-like commodities, such as gold and silver, respond to these UMP shocks most aggressively. While an easing FG shock leads to increases in their prices, an easing LSAP shock has the opposite effect. This differential response suggests that these asset-like commodities are being used as inflation and exchange rate hedges. In contrast, production-like and agricultural commodities respond to UMP shocks in the same way as conventional monetary policy shocks. Consistent with previous literature, we find that easing LSAP shocks, to some extent, signal a negative economic outlook. Policymakers can exploit the responses from the various commodity classes examined in this paper when evaluating the effectiveness of monetary policy in different sectors of the economy.

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“…Amatov and Dorfman (2017) analyse the relationship between U.S. monetary policy and commodity prices using a VECM approach. Their results show that the impact of liquidity and interest rate policy shocks are significant in the commodity prices.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Of these, the structural vector autoregressive (SVAR) models have been the most well‐known methods (Orden and Fackler, 1989; Amisano and Giannini, 1997; Anzuini et al., 2013; Hammoudeh et al., 2015). But there are only a few studies that look at short‐ and long‐term effects of monetary policy by using structural vector error correction models (SVECMs) between series (Choe and Koom, 1993; Cabrales et al., 2014; Ahumada and Cornejo, 2015; Amatov and Dorfman, 2017).…”

Section: Introductionmentioning

confidence: 99%

U.S. Monetary Policy and Commodity Prices: A SVECM Approach

Siami‐Namini

2021

J of App Econs and Policy

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This article discusses how U.S. monetary policy shocks can influence commodity prices. Historically, a lot of studies in the literature have investigated the impact of short‐term interest rates on different types of commodity prices. This article takes a more comprehensive approach and contributes to the literature by analysing the effect of both short‐ and long‐term interest rates as well as M2 money stock on commodity prices at aggregate and sub‐indices levels. The “B‐model” variant of structural vector error correction models (SVECMs) is used to estimate the restricted contemporaneous impact matrix (SR) and the restricted long‐term impact matrix (LR). Furthermore, SVECMs impulse response functions are used to evaluate the extent to which monetary policy shocks explain commodity prices. In contrast with the results of previous studies, we do not find evidence of a strong response pattern of commodity prices to monetary policy shocks in the short term. However, monetary policy shocks can explain commodity prices and their components in the long term. From a policy point of view, monetary authorities should exercise caution in using short‐term effects of monetary policy instruments on commodity prices, given their long‐term impact is inflationary while there are no beneficial short‐term effects.

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The Effects on Commodity Prices of Extraordinary Monetary Policy

Cited by 15 publications

References 16 publications

Algorithmic Sangfroid? The Decline of Sensitivity of Crude Oil Prices to News on Potentially Disruptive Terror Attacks and Political Unrest

Algorithmic Sangfroid? The Decline of Sensitivity of Crude Oil Prices to News on Potentially Disruptive Terror Attacks and Political Unrest

The impact of forward guidance and large-scale asset purchase programs on commodity markets

U.S. Monetary Policy and Commodity Prices: A SVECM Approach

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