Abstract
Agricultural commodities experienced a rise in prices during the first decade of the 2000s. The literature shows that the monetary policies adopted by developed economies can influence practically all economic indicators of developing markets. This paper aims to evaluate the effect of selected monetary policy measures on the prices of three selected agricultural commodities: soy, corn and sugar. Secondly, the study analyzes the price formation of these commodities during a period of expansionary monetary policy, in order to better understand how they are influenced by unconventional instruments. The central hypothesis is that the excessive liquidity created by the FED spills over to emerging economies, boosting investment and consumption there and, lastly, causing a commodity cycle. Our data (January 2000–December 2019) support this hypothesis and prove that expansionary monetary policy is capable of impacting agricultural commodities’ prices, but by different channels, due to the specificities of each commodity. The fact that people have more capital due to the credit obtained from loans seems to influence the price of sugar; soy is highly influenced by exchange rates of emerging markets, and corn is not very responsive to the used variables, which might be due to the high production rates of this commodity in the U.S. and the protectionist policies adopted by the government.
Highlights
Agriculture is no less globalized than other sectors of the economy
“How do commodities differ in sensitivity to monetary stimulus?” This paper evaluates whether the formation of prices for three selected commodities is influenced by monetary policy and, how this relationship unfolds during a period of monetary expansion
We offer an overview of global liquidity and its transmission mechanisms, spillover and its transmission mechanisms, and different approaches to analyzing the impact of monetary policy on commodities’ prices
Summary
Agriculture is no less globalized than other sectors of the economy. Agricultural commodities are no longer traded by a merchant in a galleon, but by contracts traded at high speed in various exchanges.The opulence of commodity exchanges and trading firms are not necessarily the same for producers and agriculture-dependent countries. Agriculture is no less globalized than other sectors of the economy. Agricultural commodities are no longer traded by a merchant in a galleon, but by contracts traded at high speed in various exchanges. The opulence of commodity exchanges and trading firms are not necessarily the same for producers and agriculture-dependent countries. According to the United Nations [1], historically, the lower the countries’ income, the larger its agricultural share in GDP. In 1980, the share of agriculture in GDP was almost two times higher in low-income countries than in middle-income ones, and it was almost three times higher in 2010. From 1980 to 2010, the agricultural share in GDP for high-income countries decreased by 66%, and, for low-income ones, by 31%. Technology in agribusiness is thriving, helping developing economies to gain competitiveness and allowing them to pursue more complex activities. Promising study fields for agriculture include genetic engineering, data mining for agricultural, artificial intelligence for plantations, blockchain to help in the supply chain of agricultural goods, and an endless variation of technology for various purposes, from fighting pests to forecasting the nutritional information of each individual crop
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
