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Competitive Storage and Commodity Price Dynamics

  • Deaton, Angus
  • Laroque, Guy

By buying cheap and selling dear, risk-neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand. Commodity prices are variable and strongly positively correlated from one year to the next. The variability is often explained by supply factors and the autocorrelation by the activities of speculators. The authors show that this explanation is not consistent with the evidence. Speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence but not to the high levels that are observed in the data. Copyright 1996 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/262046
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 104 (1996)
Issue (Month): 5 (October)
Pages: 896-923

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Handle: RePEc:ucp:jpolec:v:104:y:1996:i:5:p:896-923
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  1. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Development Studies.
  2. N/A, 1984. "Chapter II. The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 107(1), pages 28-46, February.
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  14. Butler, J.R.G., 1984. "The DRG Hospital Scheme: Some Economic Aspects," Economic Analysis and Policy, Elsevier, vol. 14(2), pages 166-181.
  15. Clay,C. G. A., 1984. "Economic Expansion and Social Change," Cambridge Books, Cambridge University Press, number 9780521277686, Junio.
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  17. John F. E. Ohiorhenuan, 1984. "The Political Economy of Military Rule in Nigeria," Review of Radical Political Economics, Union for Radical Political Economics, vol. 16(2-3), pages 1-27, June.
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  20. anonymous, 1984. "Developments in the international economy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 47, july.
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