TY - JOUR
T1 - Global vs Sectoral Factors and the Impact of the Financialization in Commodity Price Changes
AU - Poncela, Pilar
AU - Senra, Eva
AU - Sierra, Lya Paola
N1 - Publisher Copyright:
© 2020, The Author(s).
PY - 2020/9/1
Y1 - 2020/9/1
N2 - Commodity prices influence price levels of a broad range of goods and, in the case of some developing economies, production and export activity. Therefore, information about future commodity inflation is useful for central banks, forward-looking policy-makers, and economic agents whose decisions depend on their expectations about it. After 2004, we have witnessed the so-called financialization of the commodity markets, which might induce greater communalities among commodity prices. This paper reports evidence on the relevance of the forecasting content of co-movement after 2004. With the use of large and small scale factor models we find that for the short run, in addition to dynamics, sectoral communality has relevant predictive content. For 12 months ahead, dynamics lose relevance while communality remains relevant.
AB - Commodity prices influence price levels of a broad range of goods and, in the case of some developing economies, production and export activity. Therefore, information about future commodity inflation is useful for central banks, forward-looking policy-makers, and economic agents whose decisions depend on their expectations about it. After 2004, we have witnessed the so-called financialization of the commodity markets, which might induce greater communalities among commodity prices. This paper reports evidence on the relevance of the forecasting content of co-movement after 2004. With the use of large and small scale factor models we find that for the short run, in addition to dynamics, sectoral communality has relevant predictive content. For 12 months ahead, dynamics lose relevance while communality remains relevant.
KW - Co-movement
KW - Commodity prices
KW - Dynamic factor models
KW - Global factor
KW - Out-of-sample forecast
KW - Sectoral factors
UR - http://www.scopus.com/inward/record.url?scp=85082852259&partnerID=8YFLogxK
U2 - 10.1007/s11079-019-09564-4
DO - 10.1007/s11079-019-09564-4
M3 - Article
AN - SCOPUS:85082852259
SN - 0923-7992
VL - 31
SP - 859
EP - 879
JO - Open Economies Review
JF - Open Economies Review
IS - 4
ER -