Determinants of Volatile Commodity Prices

Abstract

Recent hikes and fluctuations in global commodity prices in 2007-11 have raised many issues. The present analysis is an attempted advancement to identify appropriate associations to volatile commodity prices by advancing existing analysis of S&P GSCI commodity spot price index is used as a proxy for global commodity prices for the period June-1996 to June-2011 monthly time series. In this paper, we have made an attempt to identify more determine factors for recent hike and fluctuations in global commodity prices, including, monetary policies, macro economic factors, financialization in commodity markets and impact of various other commodity prices. Empirical evidence is that there is a negative relationship existing with monetary policy, mixed evidence with macro economic indicators and positive impact of financialization of commodity markets. And various commodities such as crude oil and non-energy commodities are having significant effect on volatile commodity prices.

Keywords: volatility commodity prices, monetary policy, macroeconomics, financialization, equity markets, policy

JEL Classification: C58, E3, E44, E52, E64, F15, F41, F43, Q02, Q11