We study the effect of monetary policy shocks on commodity prices. While most of the literature has found that expansionary\nshocks have a positive effect on aggregate price indices, we study the effect on individual prices of a sample of four commodities.\nThis set of commodity prices is essential to understand the dynamics of the balance of payments in Colombia. The analysis is based\non structural VAR models; we identify monetary policy shocks following Kim (1999, 2003) upon quarterly data for commodity\nprices and their fundamentals for the period from 1980q1 to 2010q3. Our results show that commodity prices overshoot their long\nrun equilibrium in response to a contractionary shock in theUSmonetary policy and, in contrast with literature, the response of the\nindividual prices considered is stronger than what has been found in aggregate indices. Additionally, it is found that the monetary\npolicy explains a substantial share of the fluctuations in prices.
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