This event is the final presentation of the project Commodity price uncertainty and macroeconomic dynamics funded by the Austrian National Bank Anniversary Fund.
Abstract
We construct a global metal price uncertainty index and examine its effects on economic activity and stock markets at the global level as well as for the euro area and the United States. Our analysis focuses on industrial metals - copper, aluminum, nickel, zinc, and lead - as included in the Goldman Sachs Commodity Index. To characterize price developments, we employ spot and futures prices of these metals traded at the London Metal Exchange.
Methodologically, we extend the framework of Jurado, Ludvigson and Ng (2015) to construct the metal price uncertainty index. We then conduct a range of empirical analyses, including impulse response and forecasting exercises, allowing for regime-dependent dynamics conditional on periods of high and low metal price uncertainty. We find that metal price uncertainty helps to improve forecasting.
In addition, we observe that threshold VAR models are often the best models with respect to forecast accuracy when compared to linear and benchmark models. In the impulse response analysis with threshold VAR models we see different responses (of industrial production, the stock market, etc.) in high uncertainty and low uncertainty regimes to shocks in metal price uncertainty. For example, a shock in metal price uncertainty has a significantly stronger negative effect in the high uncertainty regime than in the low uncertainty regime.
Speaker
Jaroslava Hlouskova, Ines Fortin and Leopold Sögner are senior researchers at the IHS research group Business Cycles, Growth and Public Finances.
Please register at event@ihs.ac.at