Monetary Policy, Commodity Prices and Inflation - Empirical Evidence from the US

33 Pages Posted: 24 Nov 2010

See all articles by Florian Verheyen

Florian Verheyen

University of Duisburg-Essen - Department of Economics and Business Administration

Date Written: November, 19 2010

Abstract

The past years were characterized by unprecedented rises in prices of commodities such as oil or wheat and inflation rates moved up above the mark of two percent per annum. This led to a revival of the debate whether commodity prices indicate future CPI inflation and if they can be used as indicator variables for central banks or not. We apply various econometric methods like Granger causality tests and SVAR models to US data. The results corroborate the notion that there was a strong link between commodity prices and CPI inflation in the 1970s and the beginning of the 1980s. For a more recent sample, the relationship has weakened, respectively diminished.

Keywords: Monetary policy, commodity prices, inflation, United States, SVAR

JEL Classification: E44, E52, E58

Suggested Citation

Verheyen, Florian, Monetary Policy, Commodity Prices and Inflation - Empirical Evidence from the US (November, 19 2010). Available at SSRN: https://ssrn.com/abstract=1711851 or http://dx.doi.org/10.2139/ssrn.1711851

Florian Verheyen (Contact Author)

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

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