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

June 1, 1997

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Format: Chicago

John Thornton, and Alicia García-Herrero. World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence From the United Kingdom, (USA: International Monetary Fund, 1997) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Commodity price indexes, Commodity prices, Inflation, Inflation targeting, Monetary policy, Price indexes, Prices

Keywords: Causality from commodity price, Commodity, Commodity content, Commodity price, Commodity price indexes, Commodity prices, Commodity prices with U.K., Commodity stock, Decline in the commodity content of output, Error-correction term, Gold price index, Granger-causality technique, Granger-causality test, Impact of commodity price, Inflation, Inflation targeting, Monetary policy, Price index, Price indexes, RPIX, United Kingdom, Use of commodity price, World commodity price indices, WP

Publication Details

Pages:

15
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1997/070
Stock No:

WPIEA0701997
ISBN:

9781451960471
ISSN:

1018-5941

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