The Excess Co-Movement of Commodity Prices
Robert S. Pindyck
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
Julio J. Rotemberg
Harvard University - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)
NBER Working Paper No. w2671
This paper tests and confirms the existence of a puzzling phenomenon - the prices of largely unrelated raw commodities have a persistent tendency to move together. We show that this comovement of prices is well in excess of anything that can be explained by the common effects of past, current, or expected future values of macroeconomic variables such as inflation, industrial production, interest rates, and exchange rates. These results are a rejection of the standard competitive model of commodity price formation with storage.
Number of Pages in PDF File: 33
Date posted: July 9, 2004
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