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How the financial market can dampen the effects of commodity price shocks

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  • Kim, Myunghyun

Abstract

Commodities have begun to function as an asset class during the past decade, as trading in commodity derivatives has increased massively since the mid-2000s. This paper studies the role of commodities as an asset class in accounting for the recently lessened impacts of commodity price shocks on the U.S. economy, by constructing a model with a financial accelerator and with financial intermediaries that own two assets tied to commodities as well as to capital. Simulation results of the model show that financial intermediaries' holdings of commodities as assets have contributed to the recent reduction in the effects of commodity price shocks.

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  • Kim, Myunghyun, 2020. "How the financial market can dampen the effects of commodity price shocks," European Economic Review, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:eecrev:v:121:y:2020:i:c:s0014292119302004
    DOI: 10.1016/j.euroecorev.2019.103340
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    Cited by:

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    2. Soni, Rajat Kumar & Nandan, Tanuj, 2022. "Modeling Covid-19 contagious effect between asset markets and commodity futures in India," Resources Policy, Elsevier, vol. 79(C).
    3. Paolo Gelain & Marco Lorusso, 2022. "Oil Price Fluctuations, US Banks, and Macroprudential Policy," Working Papers 22-33R, Federal Reserve Bank of Cleveland, revised 23 Oct 2024.
    4. Kyei, Collins Baffour & Cantah, William Godfred & Junior Owusu, Peterson, 2023. "Effect of commodity prices on financial soundness; insight from adaptive market hypothesis in the Ghanaian setting," Resources Policy, Elsevier, vol. 86(PA).
    5. Kim, Myunghyun, 2024. "Declining real interest rates: The role of energy prices in energy importers," Energy Economics, Elsevier, vol. 129(C).
    6. Borgards, Oliver & Czudaj, Robert L. & Hoang, Thi Hong Van, 2021. "Price overreactions in the commodity futures market: An intraday analysis of the Covid-19 pandemic impact," Resources Policy, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Commodities as an asset; Commodity price shocks; Commodity derivatives; Financial accelerator;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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