Political Uncertainty and Commodity Prices
Charles A. Dice Center Working Paper No. 2017-25
58 Pages Posted: 6 Nov 2017
Date Written: October 2017
Using a comprehensive sample of 87 commodities, we examine the effect of political uncertainty on commodity prices. We show that political uncertainty surrounding U.S. presidential elections has a significant negative impact on commodity prices worldwide, likely due to shrinking demand before the elections. On average, commodity prices decline by 6.4% in the quarter leading up to U.S. elections. This effect holds true for gold, and is stronger for close elections and elections during recessions. On the other hand, political uncertainty in commodity producing countries with little demand pushes commodity prices up by 5.4% in the quarter before their national elections.
Keywords: Political Uncertainty, Commodity Prices, U.S. Presidential Elections
JEL Classification: G12, G14, G15, G18, Q02
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