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Changing interactions on markets for competing commodities: the case of natural and synthetic rubber prices

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  • Smit, H. P.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

  • Vogelvang, E

Abstract

Prices on commodity markets are often correlated because they react to similar cycles in the economy. This is especially true for commodities which are inputs into the same products. And even more so for commodities which are considered here as partial substitutes. Prices of such commodities are considered to be highly correlated. This paper investigates the leads and lags in prices for natural rubber (NR) and synthetic rubber (SR). It concludes that prices of NR lead prices of SR by about three to six months, depending on the country concerned. This influence is, however, changing over time, as can be estimated when using the Kalman filter approach for a model with time-varying parameters. The relationships are reducing in significance over time: both positive and negative coefficients tend to zero, implying that both markets are increasingly separated. The influence of demand on the other hand remains quite stable. A notable exception is the EU. The two markets, NR and SR, are increasingly insulated and the consumption side continues to play a steady and significant role.

Suggested Citation

  • Smit, H. P. & Vogelvang, E, 1997. "Changing interactions on markets for competing commodities: the case of natural and synthetic rubber prices," Serie Research Memoranda 0023, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:1997-23
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    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/19970023.pdf
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    References listed on IDEAS

    as
    1. Harvey,Andrew C., 1991. "Forecasting, Structural Time Series Models and the Kalman Filter," Cambridge Books, Cambridge University Press, number 9780521405737.
    2. Merkies, Arnold H. Q. M. & Steyn, Ivo J., 1994. "Modelling changing lag patterns in Dutch construction," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 499-509, March.
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    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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