Forecasting inflation using commodity price aggregates

Yu-chin Chen, Stephen J Turnovsky and Eric Zivot

Journal of Econometrics, 2014, vol. 183, issue 1, 117-134

Abstract: This paper shows that for five small commodity-exporting countries that have adopted inflation targeting monetary policies, world commodity price aggregates have predictive power for their CPI and PPI inflation, particularly once possible structural breaks are taken into account. This conclusion is robust to using either disaggregated or aggregated commodity price indexes (although the former perform better), the currency denomination of the commodity prices, and to using mixed-frequency data. In pseudo out-of-sample forecasting, commodity indexes outperform the random walk and AR(1) processes, although the improvements over the latter are sometimes modest.

Keywords: Commodity prices; CPI and PPI inflation forecasts; Inflation targeting (search for similar items in EconPapers)
JEL-codes: C53 E61 F31 F47 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:183:y:2014:i:1:p:117-134

DOI: 10.1016/j.jeconom.2014.06.013

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