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The myth of co-moving commodity prices

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There is a common perception that the prices of unrelated commodities move together. This paper re-examines this notion, using a measure of co-movement 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 co-movement in commodity prices. The results carry an important policy implication, as the study provides no support for earlier claims of irrational trading behaviour by participants in world commodity markets.

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  • Paul Cashin & C John McDermott & Alasdair Scott, 1999. "The myth of co-moving commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/9, Reserve Bank of New Zealand.
  • Handle: RePEc:nzb:nzbdps:1999/09
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    References listed on IDEAS

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    1. Don Harding & Adrian Pagan, 1999. "Dissecting the Cycle," Melbourne Institute Working Paper Series wp1999n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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    4. Deb, Partha & Trivedi, Pravin K & Varangis, Panayotis, 1996. "The Excess Co-movement of Commodity Prices Reconsidered," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 275-291, May-June.
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    7. Arthur F. Burns & Wesley C. Mitchell, 1946. "Measuring Business Cycles," NBER Books, National Bureau of Economic Research, Inc, number burn46-1, March.
    8. Cashin, Paul & McDermott, C. John & Scott, Alasdair, 2002. "Booms and slumps in world commodity prices," Journal of Development Economics, Elsevier, vol. 69(1), pages 277-296, October.
    9. Palaskas, Theodosios B. & Varangis, Panos N., 1991. "Is there excess co-movement of primary commodity prices? A co-integration test," Policy Research Working Paper Series 758, The World Bank.
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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