The Money Supply and Nominal Agricultural Prices

Barnett, Richard C.; Bessler, David A.; Thompson, Robert L.

doi:10.2307/1240878

Cited by 46 publications

(17 citation statements)

References 11 publications

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“…Many theoretical and empirical studies have illustrated the significant impact of macroeconomic disturbances on agriculture. The bulk of the empirical literature by Chambers (1981Chambers ( , 1984Chambers ( , 1985; Chambers andJust (1981, 1982); Belongia and King; Barnett, Bessler, and Thompson;andBelongia (1984, 1986), for example, has focused on the effects of monetary variables and exchange rates on agricultural prices, exports and inventories. While the theoretical literature has generally addressed these same issues, recent structural models of commodity price determination by Bond, Chambers, Frankel and Hardouvelis, and Frankel emphasize the important role of expectations concerning macroeconomic disturbances in the price formation process.…”

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confidence: 99%

The Effects of Macroeconomic Announcements on Commodity Prices

Barnhart

1989

American J Agri Economics

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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.

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confidence: 99%

The Effects of Macroeconomic Announcements on Commodity Prices

Barnhart

1989

American J Agri Economics

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“…Macroeconomists have studied the relationships between money and income (Sims, 1972), interest rates and money (Pierce, 1977), and wages and prices (Geweke, 1975). Examples of applications of such techniques to agricultural markets include the determination of leads and lags between wheat acreage allotments and acreage supply response (Weaver, 1980), the money supply and nominal agricultural prices (Barnett, Bessler, and Thompson, 1983), and livestock prices and quantities and income (Bessler and Brandt, 1982).…”

Section: Methodsmentioning

confidence: 99%

Futures or Cash: Which Market Leads Live Beef Cattle Prices?

Oellermann

Farris

1985

Journal of Futures Markets

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hether the cash or the futures market is the center of price discovery for W slaughter cattle has been debated since the inception of the live cattle futures contract in 1964. Using a theoretical model, Stein (1961) showed that futures and cash prices for a given commodity are determined simultaneously. However, the prices actually discovered in one market might lead those discovered in the other (Brorsen, Bailey, and Richardson, 1984). Buyers and sellers in the futures markets may have greater access to new information than participants in the cash market.In addition, transaction costs may differ in the two markets. Thus, prices might respond more quickly to changes in underlying supply and demand conditions in one market than in the other.If prices discovered in futures markets are used to price cash market transactions, futures markets may contribute to increased efficiency in commodity markets (Working, 1948). The relationship between futures prices and corresponding cash commodity prices can reflect the impact of futures markets on cash market transactions (Garbade and Silber, 1983).In this article, dynamic relations between changes in cash and futures prices are examined for live beef cattle. In particular, the analysis seeks to delineate which market leads the other in discovering price, and whether this lead-Iag relationship has changed as use of the live cattle futures contract has expanded and supplydemand conditions in the cattle market have evolved.The authors gratefully acknowledge the comments of Jon A. Brandt and B. Wade Brorsen on an earlier draft.

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“…Monetary expansion has impacted agricultural prices through various channels over time (Gilbert 2010), but the link between macroeconomics and commodity prices is established based on three assumptions: that money is neutral in the long run; that changes in nominal money lead to changes in relative prices in the short run; and that some markets adjust slower to the shocks and cause overshooting (Bordo 1980;Barnett, Bessler, and Thompson 1983;Frankel 1984). When a temporary change in a price extends beyond its long-run equilibrium, overshooting occurs (Saghaian, Reed, and Marchant 2002).…”

Section: The Theoretical Modelmentioning

confidence: 99%

The Impact of Energy Sector on Overshooting of Agricultural Prices

Asgari¹,

Saghaian²,

Reed³

2020

American J Agri Economics

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The Federal Reserve shifted monetary policy from early 2016 by gradually increasing nominal interest rates until very recently (July 2019). A decline in commodity prices is expected in response to a contractionary policy. According to the overshooting hypothesis, agricultural prices could decrease more than their long‐run equilibrium levels (i.e., overshoot) in the short run. This research contributes to the overshooting literature by including the energy sector in the overshooting model. The theoretical results show that flexible energy prices share the burden of the shock with other flexible prices and, thus, agricultural prices and the exchange rate overshoot but less than the results of prior studies. The empirical results confirm the theoretical expectation that agricultural commodities adjust faster than manufacturing prices, but energy prices reduce the extent to which agricultural prices overshoot. This adjustment behavior has implications for income stability and financial viability of farmers.

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The Money Supply and Nominal Agricultural Prices

Cited by 46 publications

References 11 publications

The Effects of Macroeconomic Announcements on Commodity Prices

The Effects of Macroeconomic Announcements on Commodity Prices

Futures or Cash: Which Market Leads Live Beef Cattle Prices?

The Impact of Energy Sector on Overshooting of Agricultural Prices

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