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Commodity Price Responses to Monetary Policy Surprises
Author(s) -
Scrimgeour Dean
Publication year - 2015
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aau054
Subject(s) - economics , monetary economics , surprise , vector autoregression , basis point , commodity , exchange rate , point (geometry) , shock (circulatory) , inflation (cosmology) , index (typography) , interest rate , monetary policy , econometrics , finance , medicine , psychology , social psychology , physics , geometry , mathematics , theoretical physics , world wide web , computer science
Information contained in high‐frequency financial market data reveals that a 10 basis‐point surprise increase in interest rates causes commodity prices to fall immediately by approximately 0.6%. This is similar to the estimated responses of both the Standard and Poor's 500 and a United States trade weighted exchange rate index, and approximately five times larger than the response in a standard vector autoregression, even twelve months after the shock. Metals prices tend to respond more than agricultural commodities. The point estimate for oil prices is similar to other commodities, but is estimated less precisely.