The Myth of Comoving Commodity Prices

By C. John McDermott, Alasdair Scott, Paul Cashin

December 1, 1999

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C. John McDermott, Alasdair Scott, and Paul Cashin. The Myth of Comoving Commodity Prices, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Agricultural commodities, Commodities, Commodity price indexes, Commodity prices, Oil, Prices

Keywords: Agricultural commodities, Commodities move, Commodity, Commodity price indexes, Commodity prices, Commodity trader, Commodity-exporting country, Comovement, Concordance, Cross-price elasticities of demand and supply, Cross-price elasticity, Level of commodity price, Model of commodity price formation, Nominal commodity price index, Oil, Pindyck, Price movement, Statistic, Th commodity, Trough, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/169
Stock No:

WPIEA1691999
ISBN:

9781451858327
ISSN:

1018-5941

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