Monetary policy and world commodity markets: 2000-2007

Authors

  • Hossein Askari
  • Noureddine Krichene

DOI:

https://doi.org/10.13133/2037-3643/9433

Keywords:

Monetary Policy, Asset Inflation, Commodity Prices

Abstract

Expansionary monetary policy in key industrial countries and a rapidly depreciating US dollar sent commodity prices soaring at unprecedented rates during 2003–2007. In contrast, consumer price indices in major OECD countries, a leading indicator for monetary policy, showed almost no inflation. This twin development is a puzzle as the evolution of consumer prices were not responsive to record low interest rates, doubledigit commodity inflation, and a sharp depreciation of the dollar. A common trend, identified as a monetary shock, drives commodity prices. Policymakers face a policy dilemma: maintain expansionary monetary policy stance with persistent commodity price inflation, subsequent severe world recession, and financial disorder, or tighten monetary policy with subsequent sustained economic growth and financial and price stability.

 

 

 

JEL Codes: C10, C22, E31, E52, Q40

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Published

2010-07-28

How to Cite

Askari, H., & Krichene, N. (2010). Monetary policy and world commodity markets: 2000-2007. PSL Quarterly Review, 63(253). https://doi.org/10.13133/2037-3643/9433

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Articles