The impact of uncertainty shocks on the volatility of commodity prices

Bakas, D ORCID: https://orcid.org/0000-0003-4771-4505 and Triantafyllou, A, 2018. The impact of uncertainty shocks on the volatility of commodity prices. Journal of International Money and Finance, 87, pp. 96-111. ISSN 0261-5606

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Abstract

In this paper, we empirically examine the impact of uncertainty shocks on the volatility of commodity prices. Using several alternative measures of economic uncertainty for the U.S., we estimate their effects on commodity price volatility through VAR analysis. We find that the latent uncertainty shocks have the most significant impact on commodity price volatility when compared to observable measures of economic uncertainty. In specific, our results show that the unobservable economic uncertainty measures of Jurado et al. (2015) have a significant and long-lasting positive effect on the volatility of commodity prices. Our findings indicate that a positive shock in unobservable macroeconomic and financial uncertainty leads to a persistent increase in the volatility of the broad commodity market index and of individual commodity prices, with the macroeconomic effect being more significant. Finally, we show that the impact is stronger in energy commodities compared to agricultural and metals markets.

Item Type:	Journal article
Publication Title:	Journal of International Money and Finance
Creators:	Bakas, D. and Triantafyllou, A.
Publisher:	Elsevier
Date:	18 June 2018
Volume:	87
ISSN:	0261-5606
Identifiers:	Number Type 10.1016/j.jimonfin.2018.06.001 DOI
Divisions:	Schools > Nottingham Business School
Record created by:	Linda Sullivan
Date Added:	19 Jun 2018 13:16
Last Modified:	18 Dec 2019 03:00
URI:	https://irep.ntu.ac.uk/id/eprint/33875

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