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This article examines the interactions between money, consumer prices and commodity prices at a global level from 1970 to 2008. Using aggregated data for major Organization for Economic Cooperation and Development (OECD) countries and a Cointegrating Vector Autoregression (CVAR) framework, we are able to establish long-run and short-run relationships among these variables while the process is mainly driven by global liquidity. According to our empirical findings, different price elasticities in commodity and consumer goods markets can explain the recently observed overshooting of commodity over consumer prices. Although the sample period is rather long, recursive tests corroborate that our CVAR fits the data very well.
