The dynamics of co-movement and the role of uncertainty as a driver of non-energy commodity prices

• Autores: Pilar Poncela Blanco, Eva Senra Díaz, Lya Paola Sierra Suárez
• Localización: Notas técnicas: [continuación de Documentos de Trabajo FUNCAS], ISSN-e 1988-8767, Nº. 733, 2013
• Idioma: inglés
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• Resumen

  • The purpose of this paper is to improve the empirical evidence on commodity prices in various dimensions. First, we attempt to identify the extent of co-movements in 44 monthly non-energy commodity price series in order to ascertain whether the increase in co-movement is a recent term phenomenon. Second, we attempt to determine the role of uncertainty in determining co-movements between non-energy prices in the short run. We diagnose the overall co-movement using a Dynamic Factor Model estimated by principal components. A Factor-Augmented Vector Autoregressive (FAVAR) approach is used to assess the relationship of fundamentals, financial and uncertainty variables with the co-movement in commodity prices. We find a greater synchronization among raw materials since December 2003. Since that date, uncertainty has played an important role in determining short-run fluctuation in nonenergy raw material prices.