U.S. Inflation and Commodity Prices: Analytical and Empirical Issues

Abstract

This paper reviews both theoretical and empirical issues regarding inflation and evaluates the contribution of Kyrtsou and Labys. Analytically it is very difficult to propose a general theory of inflation because as economies evolve over time both new causes of inflation emerge and the consequences of inflation become more complex. Kyrtsou and Labys perform several tests between the Primary Commodity Price component of the PPI and the CPI and construct a noisy chaotic multivariate model that describes the relationship between these two measures of inflation.

Keywords: Inflation, Commodity Prices, Chaos, Non-linear

JEL Classification: C22, C23, E31, E60