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Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach

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Ratti, R and Vespignani, JL (2013) Commodity Prices and BRIC and G3 Liquidity: A SFAVEC Approach. Discussion Paper. University of Tasmania. (Submitted)

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Abstract

This paper investigates the influence of liquidity in the major developed and major developing economies on commodity prices. 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. BRIC liquidity is
significantly connected with global tightening while G3 liquidity is not. 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 constructed a structural factor-augmented error correction (SFAVEC) model.

Item Type: Report (Discussion Paper)
Keywords: repec, Commodity Prices, BRIC countries, G3, Global liquidity, SFAVEC
Publisher: University of Tasmania
Additional Information:

Copyright 2013 University of Tasmania, University of Western Sydney

Date Deposited: 24 Sep 2013 04:17
Last Modified: 18 Nov 2014 04:54
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