Noncausality and the commodity currency hypothesis

Matthijs Lof*, Henri Nyberg

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

9 Citations (Scopus)
112 Downloads (Pure)

Abstract

This paper provides new evidence on the role of exchange rates in forecasting commodity prices. Consistent with previous studies, we find that commodity currencies hold out-of-sample predictive power for commodity prices when using standard linear predictive regressions. After we reconsider the evidence using noncausal autoregressions, which provide a better fit to the data and are able to accommodate the effects of nonlinearities and omitted variables, the predictive power of exchange rates disappears. (C) 2017 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)424-433
Number of pages10
JournalEnergy Economics
Volume65
DOIs
Publication statusPublished - Jun 2017
MoE publication typeA1 Journal article-refereed

Keywords

  • Commodity prices
  • Exchange rates
  • Noncausal autoregression
  • Nonlinearity
  • PRESENT VALUE MODELS
  • OIL PRICE SHOCKS
  • EXCHANGE-RATES
  • FUTURES PRICES
  • MARKETS
  • BUBBLES
  • FUNDAMENTALS
  • INFLATION
  • TESTS
  • BOOMS

Cite this