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The Optimal Extraction of Exhaustible Resources

Author

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  • V. V. Chari
  • Lawrence J. Christiano

Abstract

Policymakers concerned about rapid swings in commodity prices seek economic guidance about causal factors and future trends, but standard models?based on Harold Hotelling?s classic 1931 theory?are unable to explain actual data on price variability for a wide range of commodities. In this paper, we review this ?Hotelling puzzle? and suggest modifications to current theory that may improve explanations of commodity price changes and provide better policy advice.

Suggested Citation

  • V. V. Chari & Lawrence J. Christiano, 2014. "The Optimal Extraction of Exhaustible Resources," Economic Policy Paper 14-5, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmep:14-5
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    References listed on IDEAS

    as
    1. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
    2. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
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    Cited by:

    1. Adolfo Figueroa, 2019. "Do Market Prices Reflect Real Scarcity? Theories and Facts," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(83), pages 54-74.
    2. Julia M. Puaschunder, 2021. "Climate Growth Theory," RAIS Conference Proceedings 2021 0084, Research Association for Interdisciplinary Studies.
    3. Jonathan D. Quartey, 2020. "Sustainable Energy Delivery for Africa’s Changing Climate: An Economic Assessment," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(3), pages 214-235, September.
    4. Rebelo, Sérgio & Krusell, Per & Bornstein, Gideon, 2017. "Lags, Costs and Shocks: An Equilibrium Model of the Oil Industry," CEPR Discussion Papers 12047, C.E.P.R. Discussion Papers.
    5. Gideon Bornstein & Per Krusell & Sergio Rebelo, 2017. "A World Equilibrium Model of the Oil Market," NBER Working Papers 23423, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Prices; Commodities;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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