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Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia

Author

Listed:
  • A.F.M. Kamrul Hassan

    (Curtin University of Technology, Perth, WA, 6845, Australia)

  • Ruhul A. Salim

    (School of Economics and Finance, Curtin Business School (CBS), P. O. Box U1987, Perth, WA, 6845, Australia)

Abstract

The aim of this paper is to examine whether the commodity prices predict inflation, unemployment and short term interest rate in Australia. Advanced time series econometric modeling such as vector autoregressive model, cointegration and granger causality are used for this purpose. The empirical results show that three commodity prices (COMRL, COMNRL and COMBSMTL) precede inflation. However, no evidence of reverse causation is found. These findings have important implication for monetary authority. Inflation targeting experience has so far been hit by positive supply shocks. In case of negative supply shock, commodity price may be useful in singling out the likely direction of inflation.

Suggested Citation

  • A.F.M. Kamrul Hassan & Ruhul A. Salim, 2011. "Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia," Economic Analysis and Policy, Elsevier, vol. 41(3), pages 205-216, December.
    • Handle: RePEc:eee:ecanpo:v:41:y:2011:i:3:p:205-216
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    Citations

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    Cited by:

    1. Salisu, Afees A. & Adediran, Idris A. & Oloko, Tirimisiyu O. & Ohemeng, William, 2020. "The heterogeneous behaviour of the inflation hedging property of cocoa," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    2. Chen, Peng & Miao, Xinru, 2024. "Understanding the role of China's factors in international commodity price fluctuations: A perspective of monetary-fiscal policy interaction," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1464-1483.
    3. Misati, Roseline Nyakerario & Munene, Olive, 2015. "Second Round Effects And Pass-Through Of Food Prices To Inflation In Kenya," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 3(3), pages 1-13, July.

    More about this item

    Keywords

    Commodity price; monetary policy; Cointegration; Error correction model; Granger causality test;
    All these keywords.

    JEL classification:

    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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