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Commodity Prices, Convenience Yields, and Inflation

Nikolay Gospodinov () and Serena Ng ()

The Review of Economics and Statistics, 2013, vol. 95, issue 1, 206-219

Abstract: This paper provides evidence that the two leading principal components in a panel of 23 commodity convenience yields have statistically and quantitatively important predictive power for inflation even after controlling for unemployment gap and oil prices. The results hold up in out-of-sample forecasts, across forecast horizons, and across G7 countries. The convenience yields also explain commodity prices and can be seen as informational variables about future economic conditions as conveyed by the futures markets. A bootstrap procedure for conducting inference when the principal components are used as regressors is also proposed. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Keywords: bootstrap principal components; commodity futures; inflation predictability (search for similar items in EconPapers)
JEL-codes: C22 C53 E37 G12 (search for similar items in EconPapers)
Date: 2013
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The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

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