World Commodity Prices as a Forecasting Tool for Retail Prices: Evidence from the United Kingdom
IMF Working Paper No. 97-70
Posted: 23 Apr 1998
Date Written: 1997
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: Suggested Citation