Commodity Prices and Inflation: Evidence from Seven Large Industrial Countries

84 Pages Posted: 15 Feb 2006

See all articles by James M. Boughton

James M. Boughton

International Monetary Fund (IMF) - Policy Development and Review Department; National Bureau of Economic Research (NBER)

William H. Branson

Princeton University - Woodrow Wilson School of Public and International Affairs; National Bureau of Economic Research (NBER)

Alphecca Muttardy

National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: September 14, 1989

Abstract

A two-country theoretical model is presented, showing the effects of monetary, fiscal, and supply-side disturbances on prices of primary commodities and manufactured goods, and on exchange rates. If monetary shocks dominate, then commodity prices should lead general price movements, and the level of commodity prices should be correlated with the general inflation rate. Country-specific commodity price indexes are developed for the major industrial countries. Several empirical tests broadly support the conclusions of the model. Commodity price levels tend to be cointegrated with consumer-price inflation rates. Commodity price movements contribute weakly to predictions of inflation rates but more strongly to predictions of turning points in inflation.

JEL Classification: 132, 134

Suggested Citation

Boughton, James and Branson, William H. and Muttardy, Alphecca, Commodity Prices and Inflation: Evidence from Seven Large Industrial Countries (September 14, 1989). IMF Working Paper, Vol. , pp. 1-72, 1989. Available at SSRN: https://ssrn.com/abstract=884954

James Boughton (Contact Author)

International Monetary Fund (IMF) - Policy Development and Review Department ( email )

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National Bureau of Economic Research (NBER)

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William H. Branson

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

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Princeton, NJ 08544-1021
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609-258-4828 (Phone)
609-258-5533 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Alphecca Muttardy

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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