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The impact of macroeconomic uncertainty on international commodity prices

The impact of macroeconomic uncertainty on international commodity prices PurposeThe purpose of this paper is to empirically analyze the impact of macroeconomic uncertainty on a large sample of 19 commodity markets.Design/methodology/approachThe authors rely on Jurado et al.’s (2015) measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators and estimate a threshold VAR model to assess whether the impact of macroeconomic uncertainty on commodity prices differs under the high- or low-uncertainty state.FindingsThe findings show that positive macroeconomic uncertainty shocks affect commodity prices returns negatively on average and the impact of macroeconomic uncertainty is generally higher in high-uncertainty states compared with low-uncertainty states. Besides, although the safe-haven role of precious metals is confirmed, energy and industrial markets are more sensitive to short-run and long-run macroeconomic uncertainty, respectively.Research limitations/implicationsThe findings in this study suggest that commodity prices reflect not only the level of economic fundamental but also the volatility of economic fundamental.Originality/valueThis study empirically analyzes and verifies the influence of macroeconomic uncertainty not only on oil prices but also on four groups of 19 raw materials. As for the methodological issues, the authors rely on a structural threshold vector autoregressive specification for modeling commodity price returns to account for potentially different effects depending on the macroeconomic uncertainty states. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png China Finance Review International Emerald Publishing

The impact of macroeconomic uncertainty on international commodity prices

China Finance Review International , Volume 7 (2): 22 – May 15, 2017

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2044-1398
DOI
10.1108/CFRI-06-2016-0066
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to empirically analyze the impact of macroeconomic uncertainty on a large sample of 19 commodity markets.Design/methodology/approachThe authors rely on Jurado et al.’s (2015) measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators and estimate a threshold VAR model to assess whether the impact of macroeconomic uncertainty on commodity prices differs under the high- or low-uncertainty state.FindingsThe findings show that positive macroeconomic uncertainty shocks affect commodity prices returns negatively on average and the impact of macroeconomic uncertainty is generally higher in high-uncertainty states compared with low-uncertainty states. Besides, although the safe-haven role of precious metals is confirmed, energy and industrial markets are more sensitive to short-run and long-run macroeconomic uncertainty, respectively.Research limitations/implicationsThe findings in this study suggest that commodity prices reflect not only the level of economic fundamental but also the volatility of economic fundamental.Originality/valueThis study empirically analyzes and verifies the influence of macroeconomic uncertainty not only on oil prices but also on four groups of 19 raw materials. As for the methodological issues, the authors rely on a structural threshold vector autoregressive specification for modeling commodity price returns to account for potentially different effects depending on the macroeconomic uncertainty states.

Journal

China Finance Review InternationalEmerald Publishing

Published: May 15, 2017

References