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World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence From the United Kingdom
Author: Mr. John Thornton and Ms. Alicia García-Herrero
Series:
IMF Working Papers
Volume/Issue:
Volume 1997: Issue 070
Language:
English
Publication Date:
01 Jun 1997
DOI:
https://doi.org/10.5089/9781451960471.001
ISBN:
9781451960471
ISSN:
1018-5941
Pages:
15
Keywords:
WP; commodity price; commodity; RPIX; price index; Commodity prices; monetary policy; United Kingdom; commodity content; Granger-causality test; commodity stock; world commodity price indices; use of commodity price; impact of commodity price; commodity prices with U.K.; causality from commodity price; gold price index; Granger-causality technique; decline in the commodity content of output; error-correction term; Commodity price indexes; Inflation; Inflation targeting; Price indexes
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund