Information Uncertainty and Volatility in Financial Stock Markets: Commodity Price Fluctuations and Business Cycles

Information Uncertainty and Volatility in Financial Stock Markets: Commodity Price Fluctuations and Business Cycles

Jose J Haspa DeLarosiere, Soren Nielsen
Copyright: © 2017 |Pages: 13
DOI: 10.4018/978-1-5225-1900-3.ch014
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Rising oil prices, steel prices - as well as the stronger dollar certainly impacted the financial markets during the latter part of May 2016. So also, the expected announcement of higher interest rates in June 2016 by the Federal Reserve. As well as illustrating the impact of financial shocks for emerging economies, this chapter also illustrates the impact of financial shocks for smaller – as well as more advanced economies. Having highlighted through the entire volume, the macroeconomic consequences of the changes and fluctuations of commodity prices – as reflected through the recent global financial market volatilities. This chapter will also focus on the main channels through which commodities price fluctuations affect business cycles in EMEs.
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Literature Review And Background To The Study

Bastourre et al (2012, p. 5) highlight the impact which commodity price increases has on the availability of external financing in emerging economies that rely strongly on commodities.

Furthermore, they argue that:

  • The improvement in export prices of emerging economies brings about important consequences and that in addition to the relaxation of external restriction, there is a higher level of private expenditures and fiscal resources due to the expansionary effects on tax and non-tax revenues (for example, due to the existence of exports taxes or through public property of resources such as mines or oil camps). This in their opinion, is furthermore, related to a positive impact on economic activity and consumption levels in the short term and potentially to higher savings and investment levels in the long term.

  • global liquidity and risk measures are the basic specification of push variables in econometric models available in the economic literature (page 8).

  • That the macroeconomic aspects related to commodity dynamics have gone beyond the traditional channels linked to global demand and supply of primary goods and have focused on the effect of monetary and financial macroeconomic factors (page 11).

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