Commodity Prices, Convenience Yields, and Inflation
AbstractThis paper provides evidence that the two leading principal components in a panel of 23 commodity convenience yields have statistically and quantitatively important predictive power for inflation even after controlling for unemployment gap and oil prices. The results hold up in out-of-sample forecasts, across forecast horizons, and across G7 countries. The convenience yields also explain commodity prices and can be seen as informational variables about future economic conditions as conveyed by the futures markets. A bootstrap procedure for conducting inference when the principal components are used as regressors is also proposed. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 95 (2013)
Issue (Month): 1 (March)
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Web page: http://mitpress.mit.edu/journals/
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- Yannick Le Pen & Benoît Sévi, 2013.
"Futures Trading and the Excess Comovement of Commodity Prices,"
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- Ron Alquist & Olivier Coibion, 2013. "The Comovement in Commodity Prices: Sources and Implications," IMF Working Papers 13/140, International Monetary Fund.
- Sílvia Gonçalves & Benoit Perron, 2012. "Bootstrapping factor-augmented regression models," CIRANO Working Papers 2012s-12, CIRANO.
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