Some Evidence on the Potential Role of Commodity Prices in the Formulation of Monetary Policy.

This paper analyzes several published indices and market prices of selected individual commodities for the period January 1974 through December 1990 in order to assess the potential role of commodity prices in the formulation of U.K. monetary policy. The authors generate a measure of the economic importance of commodity prices in the consumer price inflation process and test the potential role of commodity prices as an intermediate control variable by analyzing the time-series properties of the data. Their evidence suggests that published data on commodity prices appear to capture economic information on the future consumer price inflation process. Copyright 1992 by Blackwell Publishers Ltd and The Victoria University of Manchester