Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209903 
Year of Publication: 
2008
Series/Report no.: 
Working Paper No. 2008/12
Publisher: 
Norges Bank, Oslo
Abstract: 
We investigate whether a decline in real interest rates and the US dollar contribute to higher commodity prices, and whether commodity prices tend to display overshooting behavior in response to changes in especially real interest rates. We analyze the behavior of a broad range of real commodity prices, i.e. real prices of crude oil, food, metals and industrial raw materials. The analysis is based on structural VAR models estimated on quarterly data over the period 1990q1-2007q4. Our results suggest that commodity prices increase significantly in response to a reduction in real interest rates. Moreover, we find that oil prices as well as metal prices tend to display overshooting behavior in response to interest rate changes. The evidence also suggests that a decline in the dollar leads to a surge in commodity prices. Shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in the commodity prices.
Subjects: 
VAR models
commodity prices
interest rates
exchange rates
JEL: 
E37
E47
Q17
Q43
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-449-9
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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