NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Effects of Speculation and Interest Rates in a “Carry Trade” Model of Commodity Prices

Jeffrey A. Frankel

NBER Working Paper No. 19463
Issued in September 2013
NBER Program(s):   ITI   IFM

The paper presents and estimates a model of the prices of oil and other storable commodities, a model that can be characterized as reflecting the carry trade. It focuses on speculative factors, here defined as the trade-off between interest rates on the one hand and market participants’ expectations of future price changes on the other hand. It goes beyond past research by bringing to bear new data sources: survey data to measure expectations of future changes in commodity prices and options data to measure perceptions of risk. Some evidence is found of a negative effect of interest rates on the demand for inventories and thereby on commodity prices and positive effects of expected future price gains on inventory demand and thereby on today’s commodity prices.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19463

Published: Frankel, Jeffrey A., 2014. "Effects of speculation and interest rates in a “carry trade” model of commodity prices," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 88-112.

Users who downloaded this paper also downloaded these:
Ready, Roussanov, and Ward w19371 Commodity Trade and the Carry Trade: a Tale of Two Countries
Frankel w12713 The Effect of Monetary Policy on Real Commodity Prices
Engel w19336 Exchange Rates and Interest Parity
Cortazar, Kovacevic, and Schwartz w19167 Commodity and Asset Pricing Models: An Integration
Chun, Kim, and Morck w19462 Productivity Growth and Stock Returns: Firm- and Aggregate-Level Analyses
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us