Commodity prices may be a leading indicator of inflation, because of the relative importance of flexible auction markets for the determination of these prices. Empirical tests using data for the large industrial countries as a group suggest that changes in commodity prices tend to lead those in...

This paper presents a neoclassical model that explains the observed empirical relationship between government spending and world commodity supplies and the real exchange rate and real commodity prices. It is shown that fiscal expansion and increasing world commodity supplies simultaneously lead...