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Correlated shocks may reduce outcome correlations when outcomes are endogenous: a new paradox

Author

Listed:
  • Michael Beenstock

    (Hebrew University of Jerusalem)

Abstract

Correlated shocks normally increase correlations between outcomes. This note shows that when goods are substitutes in supply or demand, price correlations may vary inversely with the correlation between their shocks. This new paradox is explained.

Suggested Citation

  • Michael Beenstock, 2019. "Correlated shocks may reduce outcome correlations when outcomes are endogenous: a new paradox," Economics Bulletin, AccessEcon, vol. 39(2), pages 1651-1655.
    • Handle: RePEc:ebl:ecbull:eb-18-00967
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    correlated shocks; price correlation; new paradox;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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