U.S. Monetary Policy and Herding: Evidence from Commodity Markets

This paper investigates the presence of herding behavior across a spectrum of commodities (i.e., agricultural, energy, precious metals, and metals) futures prices obtained from Datastream. For the first time in English-language literature, this study provides an explicit investigation of the role of deviations of U.S. monetary policy decisions from a standard Taylor-type monetary rule, in driving herding behavior with respect to commodity futures prices, spanning the period 1990–2017. The results document that the commodity markets are characterized by herding. Such herding behavior is not only driven by U.S. monetary policy decisions. Such decisions exert asymmetric effects on this behavior. An additional novelty is that the results document that herding is stronger during discretionary monetary policy regimes.