IDEAS home Printed from https://ideas.repec.org/a/oup/restud/v59y1992i1p1-23..html
   My bibliography  Save this article

On the Behaviour of Commodity Prices

Author

Listed:
  • Angus Deaton
  • Guy Laroque

Abstract

This paper applies the standard rational expectations competitive storage model to the study of thirteen commodities. It explains the skewness, and the existence of rare but violent explosions in prices, coupled with a high degree of price autocorrelation in more normal times. A central feature of the model is the explicit recognition of the fact that it is impossible for the market as a whole to carry negative inventories, and this introduces an essential non-linearity which carries through into non-linearity of the predicted commodity price series. For most of the thirteen commodity prices, the behaviour of prices from one year to the next conforms to the predictions of the theory about conditional expectations and conditional variances. However, given the non-linearity both of the model and of the actual prices, such conformity is not enough to ensure that the theory yields a complete account of the data. In particular, the analysis does not yield a fully satisfactory explanation for the high autocorrelation observed in the data.

Suggested Citation

  • Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 1-23.
  • Handle: RePEc:oup:restud:v:59:y:1992:i:1:p:1-23.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.2307/2297923
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:59:y:1992:i:1:p:1-23.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/restud .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.