Factoring emerging markets into the relationship between global liquidity and commodities

Landgraf, Steven; Chowdhury, Abdur

doi:10.1108/jes-11-2013-0171

Cited by 4 publications

(3 citation statements)

References 31 publications

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“…It was found that the decrease of the interest rate boosted the rise of the commodity prices, while the increase of the money supply has less impact on the commodity prices. Landgraf & Chowdhury (2011) finds that the monetary factors in the OECD countries have no significant effect on the prices of international commodities. However, the impact of the monetary factors on the international commodities prices has been significantly enhanced after the inclusion of the BRICS countries.…”

Section: Literature Reviewmentioning

confidence: 99%

Study on the Interaction between International Commodity Price and China’s Demand

Zhuo¹

2018

ChnStd

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Based on monthly data and VAR models from March 2002 to December 2015, this paper studies the interaction between international commodity price and China's demand. The results show that the impact of China's demand can to a certain extent guide the fluctuation of commodity prices, while this impact is insignificant. Over time, the shock of commodity prices has exerted an increasingly effect on the changes in China's demand. In the context of the drastic drop of commodity prices and the slowdown of international economic growth, China should pay close attention to other factors that affect the volatility of commodity prices, such as speculative investment factors, the monetary policy of the world's major economies and take full advantage of today's low commodity prices and take muscular internationalization approach to buying important commodities cheaply for eventual global market improvement and selling on the macroeconomic trendlines.

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Section: Literature Reviewmentioning

confidence: 99%

Study on the Interaction between International Commodity Price and China’s Demand

Zhuo¹

2018

ChnStd

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“…Hammoudeh et al (2014) empirically analyzed the impact of China's monetary policy on international commodity prices using the Bayesian SVAR model and choosing China's M2 and interest rates, and found that metal raw materials are more responsive to changes in monetary policy, and the impact of interest rate adjustments on commodity prices is much higher than the impact of money supply. Landgraf and Chowdhury (2015) examines the reasons for the rise in commodity prices around 2005 by including emerging economies in the scope of the study and constructing a VEC model, and the demand channel plays a large role in explaining commodity price growth, regardless of whether the BRIC countries selected by emerging economies are included or excluded from the analysis. In addition, excess liquidity also plays a role in the rise of commodity prices, and the impact of different monetary policies on commodity prices varies from one economy to another.…”

Section: Literature Reviewmentioning

confidence: 99%

Do Commodity Futures Prices Affect Monetary Policy: Empirical Analysis from China

Gao,

Gao

2024

AJIBM

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This paper uses the cointegration correlated theory model method and the monthly data from May 2004 to October 2023 to study the role and impact of the Chinese futures market price index (total index and various sub-indices of energy, chemicals, non-ferrous metals, grains, oilseeds and soft commodities) on Chinese monetary policy variables (reserve ratio, net money supply of open market, interbank lending rate, USD/RMB exchange rate, money supply M0, M1 and M2). It is found that the total commodity futures price index and the non-ferrous index have a strong guiding effect on the monetary policy variables except for the net money supply of open market operations. All other sub-indices have a strong impact on individual monetary policy variables, except for oilseeds, and generally speaking, the total commodity price index and the non-ferrous commodity price index have a greater impact on monetary policy. The cointegration test and error correction model show that in the long and short term, various indices of futures prices have different quantitative effects on monetary policy variables, and the shock response function curve reflects that each index of futures price has different delayed effects on monetary policy variables, indicating that the overall impact of futures price index on monetary policy variables is greater, but the role of different subindices is different. Therefore, taking a variety of measures to balance the development of the futures market and better enhance the impact of the futures price index on monetary policy will help improve the implementation effect of monetary policy and better promote the development of macroeconomy.

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“…Istiak and Alam (2020) discuss the spillover from the economic policy to the stock market. Demery and Phelps (1980), Landgraf and Chowdhury (2015) and Basu and Nag (2020) discuss some issues of the relationship between commodity and the macroeconomy but not yet with the portfolio managers. Our work complements the previous studies by analyzing the specific role of commodities in the financial assets (stocks, bonds and FX) portfolios.…”

Section: Review Of Literaturementioning

confidence: 99%

Commodity hedging benefits: analyses among different financial assets

Chalid

Handika

2022

JES

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PurposeThis study aims to investigate the benefits of commodity hedging in the global stock index, bond and foreign currency (FX) portfolios.Design/methodology/approachThe authors compare various hedging strategies and factor transaction costs. The authors analyze equally weighted, dynamic hedging ratio, risk parity and reward to risk timing strategies. Volatilities are estimated using historical, GARCH(1,1), and APARCH(1,1) methods. In addition, the authors evaluate the portfolio's hedging performance (HP) based on four different dimensions: volatility (annualized standard deviation), Sharpe ratio (SR), HP, and high-low ratio (HL).FindingsThe authors observe different benefits of the commodity hedging strategy among financial assets (stocks, bonds or FX).The authors find that commodity hedging in the stock markets is the best option, if the authors optimize the hedging ratio using dynamic hedging from historical data. The authors also document that for stock portfolio managers, adding commodities will generate a more conservative strategy, whereas for bond and/or FX portfolio managers, adding commodities will generate a more aggressive strategy.Originality/valueThis study contributes to the literature by investigating commodity hedging in the global stock index, bond and FX portfolios. First, the authors provide details on the diversification benefits in the commodities. Second, the authors document the hedging strategy that is the best as a part of the diversification strategy by adding commodities. Third, the authors provide a practical analysis by reporting the financial assets portfolio that is appropriate for commodity hedging following the portfolio managers' objectives (e.g. reducing risks or improving the risk-reward ratio).

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Factoring emerging markets into the relationship between global liquidity and commodities

Abstract: This paper is NOT THE PUBLISHED VERSION; but the author's final, peer-reviewed manuscript. The published version may be accessed by following the link in the citation below.

Cited by 4 publications

References 31 publications

Study on the Interaction between International Commodity Price and China’s Demand

Study on the Interaction between International Commodity Price and China’s Demand

Do Commodity Futures Prices Affect Monetary Policy: Empirical Analysis from China

Commodity hedging benefits: analyses among different financial assets

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