Inflationary Dynamics and the Angell-Johnson Proposals

The links between commodity prices, interst rates, wages, and the exchange rate of the U.S. dollar with consumer prices is investigated. An ARIMA transfer function methodology is employed. Sample data are from January 1972 to December 1988. Although model diagnsotics are relatively good, variable lag lengths are uncovered and make the development of a single policy rule difficult. Commodity prices do, however, add incremental information that complements that provided by other inflationary indicators.