The spillover of United States monetary policy on six European agricultural commodity prices

This research examines the impact of U.S. monetary policy shocks on E.U. agricultural prices. Utilizing monthly prices of beef, milk, wheat, barley, pork, and poultry for twenty-one E.U. countries, we estimate the impact of U.S. monetary policy shocks on these six agricultural prices in a Panel Vector Autoregression with Exogenous Variables framework. We find that a contractionary monetary policy shock in the U.S. has heterogeneous effects across the storable and non-storable commodity prices in the E.U. Specifically, a contractionary monetary policy shock in the U.S. reduces E.U. wheat and barley prices and increases beef, milk, pork, and poultry prices. The effects, though modest in absolute size, are comparable to one-third to two-thirds of a typical monthly price change. The estimated impulse response functions of dynamic multipliers reveal that these six commodity prices return to equilibrium within two to five months.