The role of commodity prices in forecasting U.S. core inflation

Arbeitspapier

This note documents a curious finding about the substantial forecast ability of a simple aggregator of three commodity futures prices for U.S. core inflation. The proposed aggregator reduces the out-of-sample root mean squared error for 12-month-ahead inflation forecasts of the benchmark AR(1) model by 28 percent (20 percent) for the PCE (CPI) measure of core inflation. To avoid obfuscation of the sources of forecast ability, the model is intentionally kept simple, although extensions for improving and increasing the robustness of the forecast procedure are also discussed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2016-5

Classification and Topics

• Classification: Wirtschaft ; Forecasting Models; Simulation Methods ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Asset Pricing; Trading Volume; Bond Interest Rates
• Subject: core inflation ; commodity futures ; convenience yields ; forecasting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gospodinov, Nikolay
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/172902
• Last update: 10.03.2025, 11:42 AM CET