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    Commodity prices: How important are real and nominal shocks?

    115908_9504_CRAE WP200901 Bloch Fraser MacDonald Commodity Prices pdf.pdf (212.6Kb)
    Access Status
    Open access
    Authors
    Bloch, Harry
    Fraser, P.
    MacDonald, Garry
    Date
    2009
    Type
    Working Paper
    
    Metadata
    Show full item record
    Citation
    Bloch, Harry and Fraser, Patricia and MacDonald, Garry. 2009. Commodity prices: how important are real and nominal shocks?, Centre for Research in Applied Economics Working Paper Series; no. 200901, Curtin University of Technology, School of Economics and Finance.
    Faculty
    Curtin Business School
    School of Economics and Finance
    URI
    http://hdl.handle.net/20.500.11937/41205
    Collection
    • Curtin Research Publications
    Abstract

    We consider the response of both nominal and real commodity prices on world markets to real and nominal shocks by hypothesizing that nominal shocks can permanently affect nominal commodity prices, but can have only temporary effect on real commodity prices. Real shocks, in contrast, can have permanent as well as temporary effects on both nominal and real commodity prices. When nominal and real shocks are decomposed in this manner, real shocks are found to be of much greater importance to the observed movements in commodity prices. Further, when the shocks are related to the rate of growth of world industrial production as an indicator of business cycle movements, the results suggest that the impact of the business cycle is self-stabilizing in that there is an initial positive effect on growth in commodity prices followed by a fully offsetting negative effect.

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