NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Excess Co-Movement of Commodity Prices

Robert S. Pindyck, Julio J. Rotemberg

NBER Working Paper No. 2671
Issued in July 1988
NBER Program(s):   ME

This paper tests and confirms the existence of a puzzling phenomenon - the prices of largely unrelated raw commodities have a persistent tendency to move together. We show that this comovement of prices is well in excess of anything that can be explained by the common effects of past, current, or expected future values of macroeconomic variables such as inflation, industrial production, interest rates, and exchange rates. These results are a rejection of the standard competitive model of commodity price formation with storage.

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Published: The Economic Journal, Dec. 1990

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