Are there asymmetric relations between real interest rates and agricultural commodity prices? Testing for threshold effects of US real interest rates and adjusted wheat, corn, and soybean prices

  • Bente Castro CamposEmail author


This article analyzes whether there are asymmetric relations between real interest rates and agricultural commodity prices using quarterly data of US interest rates and agricultural commodity prices over the period of 1983q1–2014q4. While the literature has identified statistically significant negative relations between real interest rates and agricultural commodity prices, this article extends the analysis by testing for threshold effects using Hansen’s (J Econom 93(2):345–368., 1999) fixed-effect panel threshold model and testing procedure. The empirical results indicate that real interest rates and agricultural commodity prices follow a U-shaped relationship, with − 1.45 being the turning point from negative to positive effects. Specifically, if real interest rates below the threshold of − 1.45 are increased by 1%, agricultural commodity prices will decrease by 8.1%, and if real interest rates are equal or above − 1.45 and are increased by 1%, agricultural commodity prices will increase by 3.4%. As the literature suggests an inverse proportional relation between real interest rates and agricultural commodity prices, a theoretical explanation for this phenomenon has yet to be found but is probably related to assumptions about market participants’ expectations and risk behavior.


Negative real interest rates Agricultural commodity prices Fixed-effect panel threshold model 

JEL Classification

E43 Q002 C24 



I thank Thomas Bittmann for gathering the data for this article. I am very grateful to Jeffrey Frankel, James Vercammen, David Roodman, and Jens-Peter Loy for useful comments. I also would like to thank the anonymous referee for useful comments and suggestions on the development of this paper. Last but not least, I thank Edward Yiu for giving me the inspiration for writing this article. The usual disclaimer applies.

Compliance with ethical standards

Conflict of interest

Bente Castro Campos declares that she has no conflict of interest.

Human and animal rights

This article does not contain any studies with human participants or animals performed by the author.


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Copyright information

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Authors and Affiliations

  1. 1.Department of Agricultural Economics, ETSIAABUniversidad Politécnica de MadridMadridSpain
  2. 2.Research Centre for the Management of Agricultural and Environmental Risks (CEIGRAM)MadridSpain
  3. 3.Institute of Agricultural EconomicsUniversity of KielKielGermany

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