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World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence From the United Kingdom

Author

Listed:
  • Mr. John Thornton
  • Ms. Alicia García-Herrero

Abstract

This paper investigates, using cointegration and Granger-causality techniques, whether a stable long-run co-movement exists between world commodity prices and U.K. retail prices, and whether short-run changes in commodity prices convey information about future movements in U.K. retail prices. The results show noncointegration and no unidirectional Granger causality from commodity to retail prices. These findings suggest that little may be gained from using developments in commodity prices to forecast movements in retail prices in the inflation-targeting framework followed by the U.K. monetary authorities.

Suggested Citation

  • Mr. John Thornton & Ms. Alicia García-Herrero, 1997. "World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence From the United Kingdom," IMF Working Papers 1997/070, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:1997/070
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=2239
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