TY - JOUR
T1 - Commodity prices and BRIC and G3 liquidity : a SFAVEC approach
AU - Ratti, Ronald A.
AU - Vespignani, Joaquin L.
PY - 2015
Y1 - 2015
N2 - 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.
AB - 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.
UR - http://handle.uws.edu.au:8081/1959.7/563888
U2 - 10.1016/j.jbankfin.2014.12.013
DO - 10.1016/j.jbankfin.2014.12.013
M3 - Article
SN - 0378-4266
VL - 53
SP - 18
EP - 33
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -