ON PRIMARY COMMODITY PRICES - THE IMPACT OF MACROECONOMIC MONETARY SHOCKS/

The hypothesis of a long-run quantifiable relationship between non-oil primary commodity prices and macroeconomic/monetary variables-focusin g industrial production and effective exchange rate of the US dollar-i s tested by cointegration technique using quarterly data for 1970q2-93 q3. This confirmed equilibrium adjustment explains the origin of the o bserved coincidence of commodity price variations with the fluctuation s of macroeconomic/monetary variables. An error correction specificati on, including interest rate, is therefore applied to estimate the obse rved disequilibrium prices of commodities in the context of steady-sta te solutions. This instantaneous adjustment explains why commodity pri ces have fluctuated more strongly over-the last 2 decades than before. (C) 1998 Society for Policy Modeling. Published by Elsevier Science I nc.