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Modeling dynamics of metal price series via state space approach with two common factors

Author

Listed:
  • Vasyl Golosnoy

    (Ruhr-Universität Bochum)

  • Anja Rossen

    (Institute for Employment Research (IAB))

Abstract

In this paper, we model the dynamics of 100 years long monthly price series of eight nonferrous and precious metals. Applying the state space framework, we impose and identify two common factors related to nonferrous and precious metals, respectively, which exhibit quite distinct autoregressive dynamics. The preferred two common factor specifications outperform single common factor approaches, especially in the second half of the sample. Furthermore, we provide an interpretation for the extracted common factors by investigating their exposure to the major macroeconomic fundamentals.

Suggested Citation

  • Vasyl Golosnoy & Anja Rossen, 2018. "Modeling dynamics of metal price series via state space approach with two common factors," Empirical Economics, Springer, vol. 54(4), pages 1477-1501, June.
    • Handle: RePEc:spr:empeco:v:54:y:2018:i:4:d:10.1007_s00181-017-1267-9
    DOI: 10.1007/s00181-017-1267-9
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    More about this item

    Keywords

    Kalman filter; Nonferrous metals; Precious metals; State space models;
    All these keywords.

    JEL classification:

    • 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
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F00 - International Economics - - General - - - General

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