Forecasting Aluminum Prices with Commodity Currencies

Pablo Pincheira and Nicolas Hardy

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we show that the exchange rates of some commodity exporter countries have the ability to predict the price of spot and future contracts of aluminum. This is shown with both in-sample and out-of-sample analyses. The theoretical underpinning of these results relies on the present-value model for exchange rate determination and on the tight connection between commodity prices and the currencies of commodity exporter countries. We show results using traditional statistical metrics of forecast accuracy: Mean Squared Prediction Error and Mean Directional Accuracy. We also show that the first principal component of our sample of exchange rates is a useful way to summarize the predictive information contained in our set of commodity currencies.

Keywords: Forecasting; commodities; aluminum; univariate time-series models; out-of-sample comparison; exchange rates. (search for similar items in EconPapers)
JEL-codes: C0 C00 C01 C10 C11 C12 C13 C14 C18 C2 C20 C22 C24 C3 C32 C38 C4 C5 C50 C51 C52 C53 C58 E0 E3 E30 E31 E32 E37 E4 E40 E42 E43 E44 E47 E5 E58 F3 F31 F37 G1 G11 G12 G14 G17 Q3 Q31 Q32 Q4 Q47 (search for similar items in EconPapers)
Date: 2019-11-15
New Economics Papers: this item is included in nep-for, nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Forecasting aluminum prices with commodity currencies (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97005

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