Commodity Prices, Interest Rate Spreads and the Exchange Rate: Useful Monetary Policy Indicators or Redundant Information?

Susanne Polley () and Raymond Lombra ()
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Susanne Polley: Economics Department, SUNY Cortland
Raymond Lombra: Economics Department, Penn State University

Eastern Economic Journal, 1999, vol. 25, issue 2, 129-140

Abstract: We employ actual data from both private and public sector forecasters to conduct a simple, yet stringent test of the potential usefulness of indicator variables for the conduct of monetary policy. That is, we examine whether commodity prices, interest rate spreads and exchange rates can explain incipient errors in the economic forecasts developed by the Fed's staff and the ASA-NBER panel. Our results suggest that these variables do not contain additional information beyond that which policymakers have already incorporated in their forecasts. Hence, monitoring these variables further will not significantly enhance the accuracy of their forecasts, as the information in these variables is largely redundant.

Keywords: Exchange Rates; Fed; Interest Rates; Interest; Monetary Policy; Monetary; Policy (search for similar items in EconPapers)
JEL-codes: E52 F31 (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:25:y:1999:i:2:p:129-140

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