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Title: Commodity market behavior in different states of the economy Authors:  Ines Fortin - Institute for Advanced Studies (Austria) [presenting]
Jesus Crespo Cuaresma - Vienna University of Economics and Business (Austria)
Jaroslava Hlouskova - Institute for Advanced Studies (Austria)
Michael Obersteiner - International Institute for Applied Systems Analysis (Austria)
Abstract: Commodity prices have been identified as one of the main outstanding issues in the analysis of inflation. However, interpreting commodity price cycles and providing factor attribution is still a widely unsolved riddle. We plan to examine forecasting models for different commodity classes, where predictors include fundamental, macroeconomic and financial variables. The objective is to identify the role of market fundamentals such as inventories and financial market indicators in commodity price forecasts. To this end we will systematically compare a large battery of time series models including threshold models. In comparing the competing models, we use both traditional and more recent (profit-based) performance measures. The main objective is to find out whether the quality of commodity forecasts depends on the state of the economy and what variables are the key players in explaining different commodity classes in different states of the economy. We would like to see whether, for example, forecast models provide better predictions in calm than in turbulent times (periods of low/high volatility). Alternative states of the economy we would like to investigate are recessions/expansions, periods of high/low inflation, of high/low interest rates, and of different market sentiment.