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Commodity prices and inflation

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  • Fred Furlong

Abstract

This study examines the empirical relationship between changes in commodity prices and inflation by looking at the performance of non-oil commodity prices as stand-alone indicators of inflation and in conjunction with other leading indicators of inflation. The results indicate that the empirical link between commodity prices and inflation has changed dramatically over time. Commodity prices were relatively strong and statistically robust leading indicators of overall inflation during the 1970s and early 1980s, but they have been poor stand-alone indicators of inflation since the early 1980s. When considered in conjunction with other likely indicators of inflation, non-oil commodity prices have had a somewhat more statistically robust relationship with inflation in recent years, though the added information content in commodity prices regarding inflation is limited.

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Bibliographic Info

Article provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.

Volume (Year): (1989)
Issue (Month): Jun 16 ()
Pages:

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Handle: RePEc:fip:fedfel:y:1989:i:jun16

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Keywords: Prices ; Inflation (Finance);

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References

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  1. R. W. Hafer, 1983. "Monetary policy and the price rule: the newest odd couple," Review, Federal Reserve Bank of St. Louis, issue Feb, pages 5-13.
  2. C. Alan Garner, 1995. "How useful are leading indicators of inflation?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-18.
  3. Kugler, Peter, 1991. "Common trends, commodity prices and consumer prices," Economics Letters, Elsevier, vol. 37(4), pages 345-349, December.
  4. Robert H. DeFina, 1988. "Commodity prices: useful intermediate targets for monetary policy?," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-12.
  5. Frederick T. Furlong, 1989. "Commodity prices as a guide for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, issue Win, pages 21-38.
  6. S. Brock Blomberg & Ethan S. Harris, 1995. "The commodity-consumer price connection: fact or fable?," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 21-38.
  7. Cody, Brian J & Mills, Leonard O, 1991. "The Role of Commodity Prices in Formulating Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 358-65, May.
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Citations

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Cited by:
  1. Barrera, Carlos, 2010. "¿Respuesta asimétrica de precios domésticos de combustibles ante choques en el WTI?," Working Papers 2010-016, Banco Central de Reserva del Perú.
  2. Ansgar Belke & Ingo G. Bordon & Torben W. Hendricks, 2010. "Monetary Policy, Global Liquidity and Commodity Price Dynamics," Ruhr Economic Papers 0167, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Acharya, Ram N. & Gentle, Paul F. & Mishra, Ashok K. & Paudel, Krishna P., 2008. "Examining The Crb Index As An Indicator For U.S. Inflation," 2008 Annual Meeting, February 2-6, 2008, Dallas, Texas 6760, Southern Agricultural Economics Association.
  4. Ciner, Cetin, 2011. "Commodity prices and inflation: Testing in the frequency domain," Research in International Business and Finance, Elsevier, vol. 25(3), pages 229-237, September.
  5. A.F.M. Kamrul Hassan & Ruhul A. Salim, 2011. "Is there any Link Between Commodity Price and Monetary Policy? Evidence from Australia," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 41(3), pages 205-216, December.
  6. Browne, Frank & Cronin, David, 2006. "Commodity Prices, Money and Inflation," Research Technical Papers 16/RT/06, Central Bank of Ireland.
  7. Munir Jalil & Esteban Tamayo, 2011. "Pass-through of International Food Prices to Domestic Inflation During and After the Great Recession: Evidence from a Set of Latin American Economies," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  8. Robert Anderton & Alessandro Galesi & Marco Lombardi & Filippo di Mauro, 2010. "Key Elements of Global Inflation," RBA Annual Conference Volume, in: Renée Fry & Callum Jones & Christopher Kent (ed.), Inflation in an Era of Relative Price Shocks Reserve Bank of Australia.
  9. Alessio Anzuini & Marco J. Lombardi & Patrizio Pagano, 2010. "The impact of monetary policy shocks on commodity prices," Working Paper Series 1232, European Central Bank.
  10. Granger, Clive W. J. & Jeon, Yongil, 2003. "Comparing forecasts of inflation using time distance," International Journal of Forecasting, Elsevier, vol. 19(3), pages 339-349.
  11. Gianluigi Ferrucci & Rebeca Jiménez-Rodríguez & Luca Onorante, 2010. "Food price pass-through in the euro area The role of asymmetries and non-linearities," Working Paper Series 1168, European Central Bank.
  12. Al-Shawarby, Sherine & Selim, Hoda, 2012. "Are international food price spikes the source of Egypt's high inflation ?," Policy Research Working Paper Series 6177, The World Bank.
  13. George, Edward I. & Sun, Dongchu & Ni, Shawn, 2008. "Bayesian stochastic search for VAR model restrictions," Journal of Econometrics, Elsevier, vol. 142(1), pages 553-580, January.
  14. Frank Browne & David Cronin, 2007. "Commodity prices, money and inflation," Working Paper Series 738, European Central Bank.

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