The Myth of Comoving Commodity Prices

Author/Editor:

C. John McDermott ; Alasdair Scott ; Paul Cashin

Publication Date:

December 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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

Series:

Working Paper No. 1999/169

Subject:

Agricultural commodities Commodities Commodity price indexes Commodity prices Oil Prices

English

Publication Date:

December 1, 1999

ISBN/ISSN:

9781451858327/1018-5941

Stock No:

WPIEA1691999

Pages:

20

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