IDEAS home Printed from https://ideas.repec.org/p/wiw/wiwwuw/wuwp079.html
   My bibliography  Save this paper

Überprüfung von Gültigkeit und Annahmen der Friedman These für Rohstoffmärkte

Author

Listed:
  • Maria Stückler

    () (Department of Economics, Vienna University of Economics & B.A.)

Abstract

The Thesis: Commodity prices are significantly more volatile than prices of industrial products. Production as well as non speculative demand of raw materials are subject to stochastic - sometimes even systematic - fluctuations, which get translated into pronounced price fluctuations by low short run price elasticities of demand and supply. Unstable prices as such provide an incentive to speculate; and - so the Friedman thesis - profitable speculation in itself has a stabilizing effect, since "speculation can be destabilizing in general only if speculators on average sell when the currency is low in price and buy when it is high". Temporal independence between speculative and non speculative activities is the only necessary condition Friedman considers. The counter argument: As can be shown however, even under the assumption of temporal independence speculation can have a destabilizing effect despite being profitable, if the non speculative excess demand is nonlinear. Moreover its precisely because of temporal interdependence on commodity markets, that speculative profits can even be achieved by destabilizing (stable) prices. The extreme volatility of commodity prices therefore may be partly caused by (profitable) speculation as well.

Suggested Citation

  • Maria Stückler, 2002. "Überprüfung von Gültigkeit und Annahmen der Friedman These für Rohstoffmärkte," Department of Economics Working Papers wuwp079, Vienna University of Economics and Business, Department of Economics.
  • Handle: RePEc:wiw:wiwwuw:wuwp079
    Note: PDF Document
    as

    Download full text from publisher

    File URL: http://www.wu-wien.ac.at/inst/vw1/papers/wu-wp79.pdf
    Download Restriction: no

    More about this item

    Keywords

    unstable commodity prices; Friedman thesis; speculation; stabilization; temporal independence;

    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:wiw:wiwwuw:wuwp079. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Economics). General contact details of provider: http://www.wu.ac.at/economics/en .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.