A1 - Marc Joëts
A1 - Valérie Mignon
A1 - Tovonony Razafindrabe
TI - Does the volatility of commodity prices reflect macroeconomic uncertainty?
IS - 2015-02
T3 - Working Papers
KW - Macroeconomic Uncertainty
KW - Commodity Prices
KW - Threshold Vector Autoregressive Model
N2 - This paper analyzes the impact of macroeconomic uncertainty on a large sample of 19 commodity markets. We rely on a robust measure of macroeconomic uncertainty based on a wide range of monthly macroeconomic and financial indicators, and we estimate a structural threshold VAR (TVAR) model to assess whether the effect of macroeconomic uncertainty on commodity price returns depends on the degree of uncertainty. Our findings show that whereas the safe-haven role of precious metals is confirmed, agricultural and industrial markets are highly sensitive to the variability and the level of macroeconomic uncertainty, respectively. In addition, we show that the recent 2007-09 recession has generated an unprecedented episode of high uncertainty in numerous commodity markets that is not necessarily accompanied by a subsequent volatility in the corresponding prices, highlighting the  relevance of our uncertainty measure in linking uncertainty to  predictability rather than to volatility. 
ER -