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Commodity prices as predictors of aggregate price change

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  • Roy H. Webb

Abstract

Many analysts have advocated using commodity prices as a guide for monetary policy. A necessary condition is that changes in commodity prices are good predictors of future aggregate price changes. This paper examines that proposition. It shows that while commodity prices can help produce more accurate inflation forecasts, the amount of improvement is small.

Suggested Citation

  • Roy H. Webb, 1988. "Commodity prices as predictors of aggregate price change," Economic Review, Federal Reserve Bank of Richmond, vol. 74(Nov), pages 3-11.
    • Handle: RePEc:fip:fedrer:y:1988:i:nov:p:3-11:n:v.74no.6
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    File URL: https://fraser.stlouisfed.org/files/docs/publications/frbrichreview/rev_frbrich198811.pdf
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    References listed on IDEAS

    as
    1. Yi, Gang & Judge, George, 1988. "Statistical model selection criteria," Economics Letters, Elsevier, vol. 28(1), pages 47-51.
    2. Lupoletti, William M & Webb, Roy H, 1986. "Defining and Improving the Accuracy of Macroeconomic Forecasts: Contributions from a VAR Model," The Journal of Business, University of Chicago Press, vol. 59(2), pages 263-285, April.
    3. John Rosine, 1987. "Aggregative measures of price and quantity change in commodity markets," Working Paper Series / Economic Activity Section 81, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Eduardo Morales Ramos, 2009. "La evolución de la pobreza difusa multidimensional en México, 1994-2006," Monetaria, CEMLA, vol. 0(2), pages 209-270, abril-jun.
    2. Browne, Frank & Cronin, David, 2010. "Commodity prices, money and inflation," Journal of Economics and Business, Elsevier, vol. 62(4), pages 331-345, July.
    3. Michael Pedersen, 2009. "Un indicador líder compuesto para la actividad económica en Chile," Monetaria, CEMLA, vol. 0(2), pages 181-208, abril-jun.
    4. Moses Tule & Afees A. Salisu & Charles Chimeke, 2018. "You are what you eat: The role of oil price in Nigeria inflation forecast," Working Papers 040, Centre for Econometric and Allied Research, University of Ibadan.
    5. Frank Browne & David Cronin, 2009. "Una perspectiva monetaria de la relación entre los precios de productos básicos y los precios al consumidor," Monetaria, CEMLA, vol. 0(2), pages 271-296, abril-jun.
    6. Afees A. Salisu & Raymond Swaray & Hadiza Sa'id, 2021. "Improving forecasting accuracy of the Phillips curve in OECD countries: The role of commodity prices," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2946-2975, April.
    7. Walter C. Labys & Alfred Maizels, 1990. "Commodity Price Fluctuations and Macro-economic Adjustments in the Developed Countries," WIDER Working Paper Series wp-1990-088, World Institute for Development Economic Research (UNU-WIDER).
    8. Thomas M Fullerton Jr & Richard A Hirth & Mark B Smith, 2004. "Inflationary Dynamics and the Angell-Johnson Proposals," Macroeconomics 0409009, University Library of Munich, Germany.
    9. Laura D’Amato & Lorena Garegnani & Emilio Fernando Blanco, 2009. "Pronóstico de inflación en Argentina: ¿modelos individuales o pooling de pronósticos?," Monetaria, CEMLA, vol. 0(2), pages 151-179, abril-jun.
    10. 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.
    11. 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.
    12. Fernandez, Viviana, 2014. "Linear and non-linear causality between price indices and commodity prices," Resources Policy, Elsevier, vol. 41(C), pages 40-51.

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