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Expectations and commodity price dynamics: the overshooting model



Expectations and commodity price dynamics: the overshooting model



American Journal of Agricultural Economics 68(2): 344-348



Monetary policy has important effects on agricultural commodity prices because, though they are flexible, other goods prices are sticky. This paper formalizes the argument by applying the Dornbusch overshooting model. A decline in the nominal money supply is a decline in the real money supply in the short run. It raises the real interest rate, which depresses real commodity prices.

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Accession: 001591411

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DOI: 10.2307/1241436



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