TY - JOUR
T1 - Primary commodity prices
T2 - co-movements, common factors and fundamentals
AU - Byrne, Joseph P.
AU - Fazio, Giorgio
AU - Fiess, Norbert
PY - 2013/3/1
Y1 - 2013/3/1
N2 - The behavior of commodities is critical for developing and developed countries alike. This paper contributes to the empirical evidence on the co-movement and determinants of commodity prices. Using nonstationary panel methods, we document a statistically significant degree of co-movement due to a common factor. Within a Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by a simple asset pricing model, are both found to be negatively related to this common factor. This evidence is robust to the inclusion of demand and supply shocks, which both positively impact on the co-movement of commodity prices.
AB - The behavior of commodities is critical for developing and developed countries alike. This paper contributes to the empirical evidence on the co-movement and determinants of commodity prices. Using nonstationary panel methods, we document a statistically significant degree of co-movement due to a common factor. Within a Factor Augmented VAR approach, real interest rate and uncertainty, as postulated by a simple asset pricing model, are both found to be negatively related to this common factor. This evidence is robust to the inclusion of demand and supply shocks, which both positively impact on the co-movement of commodity prices.
KW - commodity prices
KW - factor models
KW - panel estimation
KW - nonstationary panel methods
UR - http://www.scopus.com/inward/record.url?scp=84867771853&partnerID=8YFLogxK
U2 - 10.1016/j.jdeveco.2012.09.002
DO - 10.1016/j.jdeveco.2012.09.002
M3 - Article
AN - SCOPUS:84867771853
SN - 0304-3878
VL - 101
SP - 16
EP - 26
JO - Journal of Development Economics
JF - Journal of Development Economics
IS - 1
ER -