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

IMF Working Paper No. 97-70

International Economics 49(3): 439-446, January 1996

Posted: 23 Apr 1998 Last revised: 5 Aug 2021

See all articles by Alicia García-Herrero

Alicia García-Herrero

Bruegel; Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS); Natixis

John Thornton

International Monetary Fund (IMF)

Date Written: 1997

Abstract

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 non-cointegration 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.

JEL Classification: E30, E52

Suggested Citation

Garcia-Herrero, Alicia and Thornton, John, World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence from the United Kingdom (1997). IMF Working Paper No. 97-70, International Economics 49(3): 439-446, January 1996, Available at SSRN: https://ssrn.com/abstract=56186

Alicia Garcia-Herrero

Bruegel ( email )

Rue de la Charité 33
B-1210 Brussels Belgium, 1210
Belgium

Hong Kong University of Science & Technology (HKUST) - HKUST Institute for Emerging Market Studies (IEMS) ( email )

IAS 2019, Lo Ka Chung Building,
Lee Shau Kee Campus, HKUST
Clear Water Bay, Kowloon
Hong Kong

Natixis ( email )

France

John Thornton (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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