Global Money Supply and Energy and Non-Energy Commodity Prices: A MS-TV-VAR Approach

39 Pages Posted: 9 Mar 2023

See all articles by Stefano Grassi

Stefano Grassi

University of Rome Tor Vergata

Francesco Ravazzolo

Free University of Bozen-Bolzano; BI Norwegian Business School - Department of Data Science and Analytics

Joaquin Vespignani

University of Tasmania - School of Economics and Finance; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Giorgio Vocalelli

University of Rome Tor Vergata

Date Written: September 2022

Abstract

This paper shows that the impact of the global money supply is disproportionally high for energy than for non-energy commodities prices. An increase in the global money supply for energy commodity prices results mostly in demand-pull inflation. However, for non-energy commodity prices, an increase in global money supply results in demand-pull inflation and cost-push inflation, as energy is a critical input for non-energy commodities. We introduce a Markov Switching framework with time-varying transition probabilities to quantify this effect. This macro-econometric model accounts for periods when the global money supply growth is slow, moderate, and fast. We find that the response to global money supply shocks is higher for energy than for non-energy commodity prices. We also find heterogeneous responses for both energy and non-energy commodities across regimes.

Keywords: Global money supply, Energy and non-energy prices, Markov-Switching V

JEL Classification: C54, E31, F01, Q43

Suggested Citation

Grassi, Stefano and Ravazzolo, Francesco and Vespignani, Joaquin and Vocalelli, Giorgio, Global Money Supply and Energy and Non-Energy Commodity Prices: A MS-TV-VAR Approach (September 2022). Available at SSRN: https://ssrn.com/abstract=4366597 or http://dx.doi.org/10.2139/ssrn.4366597

Stefano Grassi

University of Rome Tor Vergata ( email )

Via Cracovia 1
Rome, 00133
Italy

Francesco Ravazzolo

Free University of Bozen-Bolzano ( email )

Sernesiplatz 1
Bozen-Bolzano, BZ 39100
Italy

BI Norwegian Business School - Department of Data Science and Analytics ( email )

Joaquin Vespignani (Contact Author)

University of Tasmania - School of Economics and Finance ( email )

Commerce Building,
Sandy Bay Campus
Sandy Bay, TAS, Tasmania 7005
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

Giorgio Vocalelli

University of Rome Tor Vergata ( email )

Via di Tor Vergata
Rome, Lazio 00133
Italy

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