Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/172902
Authors: 
Gospodinov, Nikolay
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 2016-5
Abstract: 
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.
Subjects: 
core inflation
commodity futures
convenience yields
forecasting
JEL: 
C53
E37
G12
Document Type: 
Working Paper

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