Noncausality and the commodity currency hypothesis

Matthijs Lof; Henri Nyberg

doi:10.1016/j.eneco.2017.05.024

Noncausality and the commodity currency hypothesis

Matthijs Lof^*
, Henri Nyberg

^*Tämän työn vastaava kirjoittaja

Rahoituksen laitos

University of Turku
University of Helsinki

Tutkimustuotos: Lehtiartikkeli › Article › Scientific › vertaisarvioitu

31 Sitaatiot (Scopus)

170 Lataukset (Pure)

Abstrakti

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.

Alkuperäiskieli	Englanti
Sivut	424-433
Sivumäärä	10
Julkaisu	Energy Economics
Vuosikerta	65
DOI - pysyväislinkit	https://doi.org/10.1016/j.eneco.2017.05.024
Tila	Julkaistu - kesäk. 2017
OKM-julkaisutyyppi	A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä

Rahoitus

We thank Richard Tol (the Editor), two anonymous referees, Helina Laakkonen, Markku Lanne, Mikko Niemenmaa, Andrew Patton, Barbara Rossi and conference and seminar participants at Aalto University, the Financial Econometrics and Empirical Asset Pricing Conference (Lancaster, 2016), CREST Paris (2015), the 9th and 10th International Conference on Computational and Financial Econometrics (London, 2015; Seville, 2016), the 10th Energy and Finance Conference (London, 2015), the Society for Nonlinear Dynamics and Econometrics (Oslo, 2015), the Nordic Econometric Meeting (Helsinki, 2015) and the Finnish Economic Society (Helsinki, 2015) for useful discussions. The second author is grateful for financial support from the Academy of Finland and the Research Funds of the University of Helsinki.

Pääsy asiakirjaan

10.1016/j.eneco.2017.05.024

CCH_noncausal_20170111Accepted author manuscript, 545 KBLisenssi: CC BY-NC-ND

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title = "Noncausality and the commodity currency hypothesis",

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.",

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

author = "Matthijs Lof and Henri Nyberg",

year = "2017",

month = jun,

doi = "10.1016/j.eneco.2017.05.024",

language = "English",

volume = "65",

pages = "424--433",

journal = "Energy Economics",

issn = "0140-9883",

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T1 - Noncausality and the commodity currency hypothesis

AU - Lof, Matthijs

AU - Nyberg, Henri

PY - 2017/6

Y1 - 2017/6

N2 - 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.

AB - 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.

KW - Commodity prices

KW - Exchange rates

KW - Noncausal autoregression

KW - Nonlinearity

KW - PRESENT VALUE MODELS

KW - OIL PRICE SHOCKS

KW - EXCHANGE-RATES

KW - FUTURES PRICES

KW - MARKETS

KW - BUBBLES

KW - FUNDAMENTALS

KW - INFLATION

KW - TESTS

KW - BOOMS

U2 - 10.1016/j.eneco.2017.05.024

DO - 10.1016/j.eneco.2017.05.024

M3 - Article

SN - 0140-9883

VL - 65

SP - 424

EP - 433

JO - Energy Economics

JF - Energy Economics

ER -

Noncausality and the commodity currency hypothesis

Abstrakti

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