IDEAS home Printed from https://ideas.repec.org/a/fip/fedfer/y1996p27-47n2.html
   My bibliography  Save this article

Commodity prices and inflation

Author

Listed:
  • Frederick T. Furlong
  • Robert Ingenito

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.

Suggested Citation

  • Frederick T. Furlong & Robert Ingenito, 1996. "Commodity prices and inflation," Economic Review, Federal Reserve Bank of San Francisco, pages 27-47.
  • Handle: RePEc:fip:fedfer:y:1996:p:27-47:n:2
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/econrsrch/econrev/96-2/furlong.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kugler, Peter, 1991. "Common trends, commodity prices and consumer prices," Economics Letters, Elsevier, vol. 37(4), pages 345-349, December.
    2. 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.
    3. James M. Boughton & William H. Branson, 1988. "Commodity Prices as a Leading Indicator of Inflation," NBER Working Papers 2750, National Bureau of Economic Research, Inc.
    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. S. Brock Blomberg & Ethan S. Harris, 1995. "The commodity-consumer price connection: fact or fable?," Economic Policy Review, Federal Reserve Bank of New York, vol. 1(Oct), pages 21-38.
    6. Rik Hafer, 1983. "Monetary policy and the price rule: the newest odd couple," Review, Federal Reserve Bank of St. Louis, vol. 65(Feb), pages 5-13.
    7. C. Alan Garner, 1995. "How useful are leading indicators of inflation?," Economic Review, Federal Reserve Bank of Kansas City, vol. 80(Q II), pages 5-18.
    8. Jeffrey A. Frankel, 1986. "Expectations and Commodity Price Dynamics: The Overshooting Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 344-348.
    9. 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 358-365, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Afees A. Salisu & Raymond Swaray & Idris Adediran, 2018. "Improving the predictability of commodity prices in US inflation: The role of coffee price," Working Papers 041, Centre for Econometric and Allied Research, University of Ibadan.
    2. 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.
    3. 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.
    4. Calista Cheung, 2009. "Are Commodity Prices Useful Leading Indicators of Inflation?," Discussion Papers 09-5, Bank of Canada.
    5. Florian Verheyen, 2010. "Monetary Policy, Commodity Prices and Infl ation – Empirical Evidence from the US," Ruhr Economic Papers 0216, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    6. repec:zbw:rwirep:0216 is not listed on IDEAS
    7. Browne, Frank & Cronin, David, 2008. "A Monetary Perspective on the Relationship between Commodity and Consumer Prices," Quarterly Bulletin Articles, Central Bank of Ireland, pages 77-90, February.
    8. Eduardo Morales Ramos, 2009. "La evolución de la pobreza difusa multidimensional en México, 1994-2006," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(2), pages 209-270, abril-jun.
    9. Laura D’Amato & Lorena Garegnani & Emilio Fernando Blanco, 2009. "Pronóstico de inflación en Argentina: ¿modelos individuales o pooling de pronósticos?," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(2), pages 151-179, abril-jun.
    10. Chen, Yu-chin & Turnovsky, Stephen J. & Zivot, Eric, 2014. "Forecasting inflation using commodity price aggregates," Journal of Econometrics, Elsevier, vol. 183(1), pages 117-134.
    11. Browne, Frank & Cronin, David, 2010. "Commodity prices, money and inflation," Journal of Economics and Business, Elsevier, vol. 62(4), pages 331-345, July.
    12. Michael Pedersen, 2009. "Un indicador líder compuesto para la actividad económica en Chile," Monetaria, Centro de Estudios Monetarios Latinoamericanos, CEMLA, vol. 0(2), pages 181-208, abril-jun.
    13. Verheyen, Florian, 2010. "Monetary Policy, Commodity Prices and Infl ation – Empirical Evidence from the US," Ruhr Economic Papers 216, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    14. Pradhan, Rudra P. & Hall, John H. & du Toit, Elda, 2021. "The lead–lag relationship between spot and futures prices: Empirical evidence from the Indian commodity market," Resources Policy, Elsevier, vol. 70(C).
    15. repec:zbw:rwirep:0167 is not listed on IDEAS
    16. Ansgar Belke & Ingo G. Bordon & Torben W. Hendricks, 2009. "Global Liquidity and Commodity Prices – A Cointegrated VAR Approach for OECD Countries," Ruhr Economic Papers 0102, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    17. Wang, Qing & Hu, Yiming, 2015. "Cross-correlation between interest rates and commodity prices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 428(C), pages 80-89.
    18. Ansgar Belke & Ingo Bordon & Torben Hendricks, 2010. "Global liquidity and commodity prices-a cointegrated VAR approach for OECD countries," Applied Financial Economics, Taylor & Francis Journals, vol. 20(3), pages 227-242.
    19. Salisu, Afees A. & Adediran, Idris A. & Oloko, Tirimisiyu O. & Ohemeng, William, 2020. "The heterogeneous behaviour of the inflation hedging property of cocoa," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    20. Apergis, Nicholas & Chatziantoniou, Ioannis & Cooray, Arusha, 2020. "Monetary policy and commodity markets: Unconventional versus conventional impact and the role of economic uncertainty," International Review of Financial Analysis, Elsevier, vol. 71(C).
    21. Belke, Ansgar H. & Bordon, Ingo G. & Hendricks, Torben W., 2014. "Monetary policy, global liquidity and commodity price dynamics," The North American Journal of Economics and Finance, Elsevier, vol. 28(C), pages 1-16.
    22. 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.

    More about this item

    Keywords

    Prices; Inflation (Finance);

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfer:y:1996:p:27-47:n:2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.