The Effects of Macroeconomic Announcements on Commodity Prices

Abstract

This article analyzes the immediate reaction of a representative sample of commodity prices and two T-bill yields to the unanticipated components of thirteen macroeconomic announcements. Surprises in the monetary variables cause the majority of the significant commodity price responses; while these plus other cyclical surprises, such as the unemployment rate, cause significant lumber and T-bill reactions. The results provide strong support for the policy anticipations hypothesis and against the inflationary expectations hypothesis, i.e., that monetary surprises cause changes in real interest rates rather than in nominal rates only as the inflationary expectations hypothesis contends.

Macro News and Commodity Returns

“…The index we use does not distinguish between different types of macro news; since the focus of this study is on the effects of positive and negative macro news respectively as reported and interpreted by the media, we use worldwide news. 4 The daily positive (negative) news index is defined as follows: Figures 1 and 2) confirms the marked increase in volatility after September 2008. This evidence that the behaviout of the first and second moment for all commodities changed substantially from the first to the second subsample motivates the inclusion of a dummy variable to control for structural breaks in the causality dynamics.…”

“…Despite not being financial assets, the latter have been shown to be affected by variables such as interest rates (Frankel, 2008) and the US dollar exchange rate, both of which are known to respond to news announcements. Frankel and Hardouvelis (1985) provide evidence of a statistically significant response to US money supply announcements; effects of macro news on various commodity prices are also found by Cai et al (2001), Hess et al (2008), Kilian and Vega (2008); commodities futures prices have been reported to be affected as well (Barnhart, 1989;Ghura, 1990). Roache and Rossi (2010) in particular show that they are influenced by the surprise element in macro news, with evidence of a pro-cyclical bias after controlling for the effects of the US dollar, the only exception being gold, which reacts counter-cyclically given its role as a safe heaven and store of value, and is more sensitive to bad news and higher uncertainty.…”

Monetary Policy Actions and Agricultural Sector Outcomes: Empirical Evidence from South Africa

“…Early contributions are attributed to (Schuh, 1974;Shei, 1978;Tweten, 1980;Barnett et al, 1981;Chambers and Just, 1982;Starleaf, 1982;Bessler, 1984;Chambers, 1984;Devadoss et al, 1985;Orden, 1986;Barbhart, 1989;Orden and Fackler, 1989). These researchers focused on the impact of monetary policies on the aggregate farm sector variables as well as the impact of macroeconomic factors on the agricultural sector.…”

The Effect of Monetary Changes on Relative Agricultural Prices

“…The question that arises is the extent to which changes in monetary policy affect the agricultural sector. The impact of macroeconomic factors on the agricultural sector already received attention in agricultural economics literature in the second half of the 1970s (see for example, Schuh, 1974;Tweeten, 1980;Bessler, 1984;Chambers, 1984;Orden, 1986;Barbhart, 1989;Orden and Fackler, 1989). These studies provide evidence of significant linkages between money supply, interest rate, exchange rate, agricultural and manufacturing prices.…”