Journal
EUROPEAN FINANCIAL MANAGEMENT
Volume 24, Issue 2, Pages 239-260Publisher
WILEY
DOI: 10.1111/eufm.12150
Keywords
commodity prices; monetary policy uncertainty; futures data; Fama-Macbeth regression; asset pricing model; futures basis; positions of traders; speculators
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Funding
- American University of Beirut's University Research Board
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This paper examines the sensitivity of commodity price changes to monetary policy uncertainty. We find evidence that the response of commodity price changes hinges on the sign of the monetary policy shock, the level of monetary policy uncertainty as well as a recession dummy. Uncertainty associated with negative monetary policy shocks leads to a decrease in commodity prices and excess speculative activity. The results from estimating an asset pricing model suggest that monetary policy uncertainty appears not to be a priced risk factor in the cross-section of commodity price changes.
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