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The rational expectations hypothesis in models of primary commodity prices

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  • Gilbert, Christopher L.

Abstract

The purpose of this paper is to examine the implications of the rational expectations hypothesis for the econometric modeling of primary commodity markets. Muth's Rational Expectations Hypothesis (REH) revolutionized economic theory and modeling on price formation in a simple agricultural market. The author studied the results of the few econometric models of primary commodity markets that have incorporated the REH. In a commodity price model, it is useful to distinguish between application of the REH to the physical production and consumption relationships and its application to how intertemporal stockholding affects short term price determination. In practice, most econometric work has concentrated on the implications of the REH for stock and price relationships.

Suggested Citation

  • Gilbert, Christopher L., 1990. "The rational expectations hypothesis in models of primary commodity prices," Policy Research Working Paper Series 384, The World Bank.
    • Handle: RePEc:wbk:wbrwps:384
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    References listed on IDEAS

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    Cited by:

    1. Cesar Revoredo, 2000. "On The Solution Of The Dynamic Rational Expectations Commodity Storage Model In The Presence Of Stockholding By Speculators And Processors," Computing in Economics and Finance 2000 42, Society for Computational Economics.
    2. Jena, Pratap Kumar, 2015. "Commodity Prices and Macroeconomic Variables in India: An Auto-Regressive Distributed Lag (ARDL) Approach," MPRA Paper 73892, University Library of Munich, Germany.
    3. Mr. Shaun K. Roache, 2012. "China's Impacton World Commodity Markets," IMF Working Papers 2012/115, International Monetary Fund.

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