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Commodity Prices, Interest Rate Spreads and the Exchange Rate: Useful Monetary Policy Indicators or Redundant Information?

Author

Listed:
  • Susanne M. Polley

    () (Economics Department, SUNY Cortland)

  • Raymond E. Lombra

    () (Economics Department, Penn State University)

Abstract

We employ actual data from both private and public sector forecasters to conduct a simple, yet stringent test of the potential usefulness of indicator variables for the conduct of monetary policy. That is, we examine whether commodity prices, interest rate spreads and exchange rates can explain incipient errors in the economic forecasts developed by the Fed's staff and the ASA-NBER panel. Our results suggest that these variables do not contain additional information beyond that which policymakers have already incorporated in their forecasts. Hence, monitoring these variables further will not significantly enhance the accuracy of their forecasts, as the information in these variables is largely redundant.

Suggested Citation

  • Susanne M. Polley & Raymond E. Lombra, 1999. "Commodity Prices, Interest Rate Spreads and the Exchange Rate: Useful Monetary Policy Indicators or Redundant Information?," Eastern Economic Journal, Eastern Economic Association, vol. 25(2), pages 129-140, Spring.
  • Handle: RePEc:eej:eeconj:v:25:y:1999:i:2:p:129-140
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume25/V25N2P129_140.pdf
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    References listed on IDEAS

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    1. Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Macroeconomics 9908002, EconWPA.
    2. Mathew Forstater, 1999. "Functional Finance and Full Employment: Lessons from Lerner for Today," Economics Working Paper Archive wp_272, Levy Economics Institute.
    3. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, vol. 14(3), pages 407-432, August.
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    Cited by:

    1. Kuhanathan Ano Sujithan & Sanvi Avouyi-Dovi & Lyes Koliai, 2013. "Does Monetary Policy Respond to Commodity Price Shocks?," Post-Print hal-01511915, HAL.
    2. repec:dau:papers:123456789/11718 is not listed on IDEAS

    More about this item

    Keywords

    Exchange Rates; Fed; Interest Rates; Interest; Monetary Policy; Monetary; Policy;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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