The Effect of Monetary Policy on Real Commodity Prices

Jeffrey A. Frankel

in Asset Prices and Monetary Policy

Published by University of Chicago Press

Published in print October 2008 | ISBN: 9780226092119
Published online February 2013 | e-ISBN: 9780226092126 | DOI:
The Effect of Monetary Policy on Real Commodity Prices

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This chapter examines the connections between commodities and monetary policy. The main argument is that monetary policy, as reflected in real interest rates, is an important—and usually underappreciated—determinant of the real prices of oil and other mineral and agricultural products. It analyzes the monetary influences on commodity prices—first for a large country, then for a small one. It concludes with a viewpoint based on reverse causality: the possible influence of commodity prices on monetary policy in a consideration of what price index to use for the nominal anchor.

Keywords: commodities; monetary policy; price index; interest rates; oil; mineral; agricultural products; commodity prices

Chapter.  15069 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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