Academic journal article Journal of Money, Credit & Banking

Commodity Prices, Money Surprises, and Fed Credibility

Academic journal article Journal of Money, Credit & Banking

Commodity Prices, Money Surprises, and Fed Credibility

Article excerpt

Commodity Prices, Money Surprises, and Fed Credibility

A recent paper by Frankel and Hardouvelis (1985) examined the impact of money supply announcement surprises on the commodity markets. The purpose of this comment is to correct some errors we discovered in the regression results reported in their paper.

We received a copy of Frankel and Hardouvelis' data set from the Journal of Money, Credit, and Banking. While examining this data we discovered that approximately one-half of the commodity price data had erroneously been collected a day earlier than intended. Therefore we decided to reestimate their regression equations with commodity data collected from the Dow Jones News Retrieval Service. In each equation the dependent variable is the difference between the closing price of the next maturing contract one hour before the weekly money announcement and the opening price of the same contract the following morning. The independent variable is the difference between the announced change in the money supply (M1) and the change forecasted (based on a survey by Money Market Services). As with Frankel and Hardouvelis, the equations were estimated for both the 1978-79 (pretargeting), and 1980-82 periods. …

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