Common factors of commodity prices
Simona DELLE CHIAIE
, , Domenico GIANNONE
2022, Journal of Applied Econometrics, 37(3), pp.461-476
block structure
commodity prices
comovement
factor models
Résumé
In this paper, we extract latent factors from a large cross-section of commodity prices, including fuel and non-fuel commodities. We decompose each commodity price series into a global (or common) component, block-specific components, and a purely idiosyncratic component. We find that the bulk of the fluctuations in commodity prices are well summarized by a single global factor. This global factor is closely related to fluctuations in global economic activity and, since the early 2000s, has become more important in explaining variations in commodity prices.