Monetary Factors in the Long-Run Co-movement of Consumer and Commodity Prices

Abstract

This paper estimates a structural VAR model of U.S. consumer and world commodity prices. An equiproportional long-run response of nominal price levels to amonetary shock yields identifying restrictions. Exogenous innovations to monetary policy account for a sizable share of the co-movement of these series, including during episodes more commonly attributed to “supply shocks.”Commodity price determination, vector autoregression, long-run restrictions, co-integration, monetary shocks