On the Behavior of Commodity Prices

40 Pages Posted: 11 May 2001 Last revised: 27 Dec 2001

See all articles by Angus Deaton

Angus Deaton

Princeton University; National Bureau of Economic Research (NBER)

Guy Laroque

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: September 1990

Abstract

The classical theory of commodity price determination integrates myopic supply and demand on the one hand with competitive storage (speculation) under rational expectations on the other. Taking into account the fact that inventories mist; be non-negative, this paper derives from the theory testable implications on the behavior of prices, and makes a first attempt to confront these implications with the empirical evidence. The nonlinearities turn out to be a crucial ingredient in matching the stylized facts, particularity the asymmetries and the sharp upward flares that characterize many commodity prices. The model, simple as it is, goes a long way in reproducing the main features of the data for a range of commodities.

Suggested Citation

Deaton, Angus S. and Laroque, Guy, On the Behavior of Commodity Prices (September 1990). NBER Working Paper No. w3439, Available at SSRN: https://ssrn.com/abstract=269628

Angus S. Deaton (Contact Author)

Princeton University ( email )

Woodrow Wilson School
Princeton, NJ 08544
United States
609-258-5967 (Phone)
609-258-5974 (Fax)

HOME PAGE: http://www.wws.princeton.edu/~deaton

National Bureau of Economic Research (NBER)

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Guy Laroque

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

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92245 Malakoff Cedex
France
+33 1 4117 7718 (Phone)
+33 1 4117 7666 (Fax)

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