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Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach

Citation

Ratti, RA and Vespignani, J, Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach, Journal of Banking and Finance, 53 pp. 18-33. ISSN 0378-4266 (2015) [Refereed Article]

Copyright Statement

Copyright 2014 Elsevier B.V.

DOI: doi:10.1016/j.jbankfin.2014.12.013

Abstract

This paper investigates the influence of liquidity in the major developed and major developing economies on commodity prices. Liquidity is taken to be M2. A novel finding is that unanticipated increases in the BRIC countries’ liquidity is associated with significant and persistent increases in commodity prices that are much larger than the effect of unanticipated increases in G3 liquidity, and the difference increases over time. Over 1999–2012 BRIC liquidity is strongly linked with global energy prices and global real activity whereas G3 liquidity is not. The impact of BRIC liquidity on mineral and metal prices is twice as large as that of G3 liquidity. Granger casualty goes from liquidity to commodity prices. BRIC and G3 liquidity and commodity prices are cointegrated. BRIC and G3 liquidity and global output and global prices are cointegrated. We construct a structural factor-augmented error correction (SFAVEC) model.

Item Details

Item Type:Refereed Article
Keywords:Commodity prices;
Research Division:Economics
Research Group:Applied Economics
Research Field:Financial Economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Monetary Policy
Author:Vespignani, J (Dr Joaquin Vespignani)
ID Code:97831
Year Published:2015
Web of Science® Times Cited:8
Deposited By:Tasmanian School of Business and Economics
Deposited On:2015-01-14
Last Modified:2017-11-01
Downloads:0

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