Economic Review

1988

 
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Nov/Dec, 1988

Commodity Prices as Predictors of Aggregate Price Change

Roy H. Webb

Many analysts have advocated using commodity prices as a guide for monetary policy. A necessary condition is that changes in commodity prices are good predictors of future aggregate price changes. This paper examines that proposition. It shows that while commodity prices can help produce more accurate inflation forecasts, the amount of improvement is small.

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