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The Myth of Comoving Commodity Prices

Author

Listed:
  • Mr. C. John McDermott
  • Mr. Alasdair Scott
  • Mr. Paul Cashin

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.

Suggested Citation

  • Mr. C. John McDermott & Mr. Alasdair Scott & Mr. Paul Cashin, 1999. "The Myth of Comoving Commodity Prices," IMF Working Papers 1999/169, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1999/169
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    WP; commodity; trough; Pindyck; statistic; Commodity prices; concordance; comovement; cross-price elasticity; th commodity; commodities move; price movement; commodity-exporting country; nominal commodity price index; model of commodity price formation; level of commodity price; cross-price elasticities of demand and supply; commodity trader; Agricultural commodities; Oil; Commodity price indexes;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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