Commodity Price Uncertainty as a Leading Indicator of Economic Activity

This article examines the impact of commodity price uncertainty on the U.S. economic activity. Our analysis indicates that uncertainty in agricultural, energy and metals markets depresses economic activity in the United States. Uncertainty shocks in agricultural and metals markets have a more long-lasting dampening effect on economic activity and its components, when compared to the effect of oil uncertainty shocks. Finally, we show that when accounting for the effects of macroeconomic and monetary factors, the negative dynamic response of economic activity to agricultural and metals uncertainty shocks remains unaltered, while the respective macroeconomic response to energy uncertainty shocks is significantly reduced.