Causal relations between commodity prices and macroeconomic and financial indicators in the context of structural breaks in the international commodity markets

The National Science Centre – 2012/07/B/HS4/00700 ( 2013 -2016)

Project manager: dr Śmiech Sławomir; Key Investigator: dr Monika Papież

Summary:

Discovering and understanding the sources of price dynamics in global commodity markets and pricing mechanisms is extremely important for the modern world. Changes in prices of energy sources are a central issue in geopolitics and a key factor in energy security for almost all countries. Changes in food prices trigger inflation and the balance of trade, and thus affect the economies of developing countries. A significant proportion of the population in these countries spend more than half of their income on food, so increasing food prices entails reducing or postponing the individual’s expenditure on education or health, which is an obvious barrier to the future development of these countries. Metal prices, including prices of precious metals, remain, as it turns out, an attractive investment opportunity in turmoil periods in the financial markets.

A large portion of commodity prices and many stock indices have shown surprisingly similar trends, especially up to the outbreak of the global financial crisis. This allowed researchers to come up with several hypotheses that tried to explain this phenomenon, including: financialization, the rising demand in Asian countries (China, India), inflation expectations, and herd behaviour of investors.

In our research project we tried to identify the sources of changes in commodity prices, and we attempted to identify the leading commodity in particular commodity groups. In the entire project we carefully addressed the issue of the stability of the relations and adopted such methodological approaches which allow for observing the changes in these relations.

The scope of our study allowed us to draw some general conclusions. The fundamental factors remain the most important source of commodity prices dynamics. The role of particular goods in commodity markets depends on the share of the goods in trade (including the global trade). In case of the food market, the importance of corn prices has increased, due to the increase in the volume of crops associated with biofuels. In case of non-renewable energy sources, Brent and WTI oil prices remain in the lead.

Different commodity markets (e.g. food, energy sources, metal markets) appear to be clearly separated from each other, and commodity prices of the market remain largely influenced by factors specific to this particular market. This does not mean that global financial and macroeconomic processes have no influence on commodity prices. This impact is noticeable, and in particular periods, e.g. directly before and during the global financial crisis, the role of financial factors has proven to be the leading one.

2017

Śmiech, S., & Papież, M. (2017). In search of hedges and safe havens: Revisiting the relations between gold and oil in the rolling regression framework. Finance Research Letters, in press http://dx.doi.org/10.1016/j.frl.2016.10.006, (MNiSW-15 pkt) (IF 5-Year 0.639).

Śmiech, S., Papież, M., & Fijorek, K. (2017). Volatility spillovers between food, energy, US dollar, and equity markets. Evidence from Diebold -Yilmaz’s approach. In M. Papież and S. Śmiech (Eds.), The 11th Professor Aleksander Zelias International Conference on Modelling and Forecasting of Socio-Economic Phenomena. Conference Proceedings. Cracow: Foundation of the Cracow University of Economics, 407-416. http://pliki.konferencjazakopianska.pl/proceedings_2017/

2016

Papież, M., Śmiech, S., & Dąbrowski, M. A. (2016). The Impact of the Euro Area Macroeconomy on Global Commodity Prices. Argumenta Oeconomica Cracoviensia, (14), 59-77. https://aoc.uek.krakow.pl/article/view/1142/802 (MNiSW-13 pkt).

Wanat, S., Śmiech, S., & Papież, M. (2016). In Search of Hedges and Safe Havens in Global Financial Markets. Statistics in Transition new series, 17(3), 557-574. PDF (MNiSW-15 pkt).

Śmiech, S., & Papież, M. (2016). It is possible to use gold and WTI to protect portfolio losses?. In The 10th Professor Aleksander Zelias International Conference on Modelling and Forecasting of Socio-Economic Phenomena. Conference Proceedings. Cracow: Foundation of the Cracow University of Economics, pp. 179 – 188.

2015

Papież, M., & Śmiech, S. (2015). Dynamic steam coal market integration: Evidence from rolling cointegration analysis. Energy Economics, 51, 510-520. http://www.sciencedirect.com/science/article/pii/S0140988315002297 (MNiSW-40 pkt) (IF 5-Year 3.374).

Wanat, S., Papież, M., & Śmiech, S., 2015. The Conditional Dependence Structure between Precious Metals: a Copula-GARCH Approach, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Krakowie, 940 (nr 4), 19-33. https://zeszyty-naukowe.uek.krakow.pl/article/view/494 (MNiSW-11 pkt)

Wanat, S., Papież,  M.,  Śmiech, S., 2014. The conditional dependence structure between precious metals: a copula-GARCH approach. MPRA paper 56540, University Library of Munich, Germany – working paper version is available from RePEc: http://ideas.repec.org/p/pra/mprapa/56540.html

Papież, M. (2015). The Application of a Rolling Causality Test for Analysing Dependencies between the Prices of Corn, Crude Oil and Ethanol, Zeszyty Naukowe Uniwersytetu Ekonomicznego w Krakowie, 940(4), 101-116.   https://zeszyty-naukowe.uek.krakow.pl/article/view/500  (MNiSW-11 pkt).

2014

Śmiech, S., Papież, M., Dąbrowski, M.A. 2014. Energy and non-energy commodity prices and the Eurozone macroeconomy: a SVAR approach. In: Papież,  M.,  Śmiech, S., (eds.), Proceedings of  the 8 th Professor Aleksander Zelias International Conference on Modelling and Forecasting of Socio-Economic Phenomena. Cracow: Foundation of the Cracow University of Economics, 165-174.

http://www.pliki.konferencjazakopianska.pl/proceedings_2014/pdf/Smiech_Papiez_Dabrowski.pdf

Papież, M., Śmiech, S., & Dąbrowski, M. A. (2014). The impact of the Euro area macroeconomy on energy and non-energy global commodity prices.

https://mpra.ub.uni-muenchen.de/56663/1/MPRA_paper_56663.pdf

Papież, M., 2014. A dynamic analysis of causality between prices of corn, crude oil and ethanol. MPRA paper 56540, University Library of Munich, Germany –  working paper version is available from RePEc: http://ideas.repec.org/p/pra/mprapa/56540.html

Śmiech, S.,  2014.  Co-movement of commodity prices – results from dynamic time warping classification. MPRA Paper 56546, University Library of Munich, Germany –  working paper version is available from RePEc: http://ideas.repec.org/p/pra/mprapa/56546.html

Papież, M., Śmiech, S., & Dąbrowski, M.A., (2014).  The Impact of the Euro Area Macroeconomy on Global Commodity Prices , in: Cobanoglu, C., Ongan, S., (eds.) Proceedings of the 2nd International Interdisciplinary Business-Economics Advancement Conference (IIBA 2014). The Istanbul University, Istanbul, Turkey, 23-33.  PDF.

Dąbrowski, M.A., Papież, M., & Śmiech, S. (2014).  Are exchange rates in CEE countries driven by monetary fundamentals? Evidence from a panel approach, in: Talašová, J., Stoklasa, J., Talášek, T., (eds.) Proceedings of 32nd International Conference Mathematical Methods in Economics. Faculty of Science Palacký University, Olomouc, Olomouc, Czech Republic, 145-150. PDF http://www.mme2014.upol.cz/downloads/MME_2014_Proceedings.pdf (MNiSW-15 pkt).

Papież, M., (2014).  A dynamic analysis of causality between prices of corn, crude oil and ethanol, in: Talašová, J., Stoklasa, J., Talášek, T., (eds.) Proceedings of 32nd International Conference Mathematical Methods in Economics. Faculty of Science Palacký University, Olomouc, Olomouc, Czech Republic, 754-759. PDF http://www.mme2014.upol.cz/downloads/MME_2014_Proceedings.pdf (MNiSW-15 pkt).

Wanat, S., Papież, M., & Śmiech, S. (2014).  The conditional dependence structure among precious metals: a copula-GARCH approach, in: Talašová, J., Stoklasa, J., Talášek, T., (eds.) Proceedings of 32nd International Conference Mathematical Methods in Economics. Faculty of Science Palacký University, Olomouc, Olomouc, Czech Republic, 1096-1101. PDFhttp://www.mme2014.upol.cz/downloads/MME_2014_Proceedings.pdf  (MNiSW-15 pkt).