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Forecasting commodity price indexes using macroeconomic and financial predictors

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  • Gargano, Antonio
  • Timmermann, Allan

Abstract

Using a long sample of commodity spot price indexes over the period 1947–2010, we examine the out-of-sample predictability of commodity prices by means of macroeconomic and financial variables. Commodity currencies are found to have some predictive power at short (monthly and quarterly) forecast horizons, while growth in industrial production and the investment–capital ratio have some predictive power at longer (yearly) horizons. Commodity price predictability is strongest when based on multivariate approaches that account for parameter estimation error. Commodity price predictability varies substantially across economic states, being strongest during economic recessions.

Suggested Citation

  • Gargano, Antonio & Timmermann, Allan, 2014. "Forecasting commodity price indexes using macroeconomic and financial predictors," International Journal of Forecasting, Elsevier, vol. 30(3), pages 825-843.
    • Handle: RePEc:eee:intfor:v:30:y:2014:i:3:p:825-843
    DOI: 10.1016/j.ijforecast.2013.09.003
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    References listed on IDEAS

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