Commodity Prices: How Important are Real and Nominal Shocks?
24 Pages Posted: 26 Nov 2010
Date Written: January 15, 2009
Abstract
We consider the response of both nominal and real commodity prices on world markets to real and nominal shocks by hypothesizing that nominal shocks can permanently affect nominal commodity prices, but can have only temporary effect on real commodity prices. Real shocks, in contrast, can have permanent as well as temporary effects on both nominal and real commodity prices. When nominal and real shocks are decomposed in this manner, real shocks are found to be of much greater importance to the observed movements in commodity prices. Further, when the shocks are related to the rate of growth of world industrial production as an indicator of business cycle movements, the results suggest that the impact of the business cycle is self-stabilizing in that there is an initial positive effect on growth in commodity prices followed by a fully offsetting negative effect.
Keywords: commodity prices, shocks, industrial production, business cycle
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Operational Aspects of Fiscal Policy in Oil-Producing Countries
-
Review of the Experience with Oil Stabilization and Savings Funds in Selected Countries
By Ugo Fasano
-
Nonrenewable Resources: A Case for Persistent Fiscal Surpluses
By Max Alier and Martin Kaufman
-
Hedging Government Oil Price Risk
By James Daniel
-
Fiscal Policy Sustainability in Oil-Producing Countries
By Claire Liuksila, Alejandro García, ...
-
Natural-Resource Depletion, Habit Formation, and Sustainable Fiscal Policy: Lessons from Gabon
By Daniel Leigh and Jan-peter Olters
-
Are Developing Countries Better Off Spending Their Oil Wealth Upfront?
By Hajime Takizawa, Edward Gardner, ...
-
Regional Monetary Integration in the Member States of the Gulf Cooperation Council
By Michael Sturm and Nikolaus Siegfried
-
Management of Oil Wealth Under the Permanent Income Hypothesis: The Case of São Tomé and Príncipe