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Informational roles of commodity prices for monetary policy: evidence from the Euro area

Author

Listed:
  • Go Tamakoshi

    (Kobe University)

  • Shigeyuki Hamori

    (Kobe University)

Abstract

This paper examines the linear and nonlinear causal relationships between commodity price indices and macroeconomic variables such as the consumer price index (CPI) and the industrial production index (IP) in the Euro zone. We use monthly time series data from January 1999 to December 2011 and employ a solid nonparametric, nonlinear causality test by Diks and Panchenko (2006) as well as the linear Granger causality test using Lag Augmented Vector Autoregression (LA-VAR) approach. Main findings of the study include: (i) Oil price only linearly Granger-causes the CPI and hence can be seen as a better information variable for the general price level than non-energy commodity price. (ii) There is a significant one-way linear causality from commodity price to IP. (iii) A significant nonlinear relationship between CPI and IP is identified by the nonparametric causality test. Such results are relevant for monetary policy makers who wish to mitigate the possible future inflation by using commodity or oil price indices as information variables.

Suggested Citation

  • Go Tamakoshi & Shigeyuki Hamori, 2012. "Informational roles of commodity prices for monetary policy: evidence from the Euro area," Economics Bulletin, AccessEcon, vol. 32(2), pages 1282-1290.
    • Handle: RePEc:ebl:ecbull:eb-12-00292
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P122.pdf
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    References listed on IDEAS

    as
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    6. Fourcans, Andre & Vranceanu, Radu, 2007. "The ECB monetary policy: Choices and challenges," Journal of Policy Modeling, Elsevier, vol. 29(2), pages 181-194.
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    8. Shigeyuki Hamori, 2007. "The information role of commodity prices in formulating monetary policy: some evidence from Japan," Economics Bulletin, AccessEcon, vol. 5(13), pages 1-7.
    9. Diks, Cees & Panchenko, Valentyn, 2006. "A new statistic and practical guidelines for nonparametric Granger causality testing," Journal of Economic Dynamics and Control, Elsevier, vol. 30(9-10), pages 1647-1669.
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    Cited by:

    1. Sara Boni & Massimiliano Caporin & Francesco Ravazzolo, 2024. "Nowcasting Inflation at Quantiles: Causality from Commodities," BEMPS - Bozen Economics & Management Paper Series BEMPS102, Faculty of Economics and Management at the Free University of Bozen.
    2. Andreasson, Pierre & Bekiros, Stelios & Nguyen, Duc Khuong & Uddin, Gazi Salah, 2016. "Impact of speculation and economic uncertainty on commodity markets," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 115-127.

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    More about this item

    Keywords

    Monetary policy; Non-parametric nonlinear Granger test; Lag-augmented VAR; Commodity prices; Oil prices;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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