The Myth of Comoving Commodity Prices

20 Pages Posted: 10 Feb 2006  

Paul Anthony Cashin

International Monetary Fund (IMF)

C. John McDermott

Reserve Bank of New Zealand

Alasdair M. Scott

International Monetary Fund (IMF)

Date Written: December 1999

Abstract

There is a common perception that the prices of unrelated commodities move together. This paper re-examines this notion, using a measure of comovement of economic time series called concordance. Concordance measures the proportion of time that the prices of two commodities are concurrently in the same boom period or same slump period. Using data on the prices of several unrelated commodities, the paper finds no evidence of comovement in commodity prices. The results carry an important policy implication, as the study provides no support for earlier claims of irrational trading behavior by participants in world commodity markets.

Keywords: Commodity prices, concordance, comovement

JEL Classification: E32, Q11, O13

Suggested Citation

Cashin, Paul Anthony and McDermott, C. John and Scott, Alasdair M., The Myth of Comoving Commodity Prices (December 1999). IMF Working Paper, Vol. , pp. 1-20, 1999. Available at SSRN: https://ssrn.com/abstract=880824

Paul Anthony Cashin (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

C. John McDermott

Reserve Bank of New Zealand ( email )

2 The Terrace
P.O. Box 2498
Wellington, 6011
New Zealand

Alasdair M. Scott

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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