—This paper presents an investigation of whether
excess liquidity has been serving as a driving force for the
increase in international commodity prices. This study uses a
structural VAR model including two global liquidity indicators
and the world production index to examine the determinants of
international commodity prices. The lending of tolerant
international bankers promoted commodity price might
increase before the global financial crisis while the international
liquidity squeeze brought about their decline after the Lehman
Shock. Among commodities, the prices of industrial metals are
more attributable to funding liquidity, and the price of crude oil,
with a market believed to be more vulnerable to speculative
money inflows, has been less dependent on liquidity. Gold is
exceptional. It acted as a safe haven during the period of
international financial dysfunction.
—Commodity index investment, excess liquidity,
flight to quality, TED.
Sanae Ohno is with the Faculty of Economic, Musashi University, Tokyo,
176-8534 Japan (e-mail: email@example.com).
Cite:S. Ohno, "Excess Liquidity and Commodity Boom," Journal of Economics, Business and Management vol. 2, no. 2, pp. 99-104, 2014.