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 -focusing industrial production and effective exchange rate of US dollar- is tested by co-integration technique using quarterly data for 1970q2-1993q3. This confirmed equilibrium adjustment explains the origine of the observed coincidence of commodity price variations with the fluctuations of macroeconomic/monetary variables. An error correction specification, including interest rate, is therefore applied to estimate the observed disequilibrium prices of commodities in the context of steady state solutions. This instantaneous adjustment explains why commodity prices havec fluctuated more strongly over the last two decades than before.