How Commodity Price Curves and Inventories React to a Short-Run Scarcity Shock

How Commodity Price Curves and Inventories React to a Short-Run Scarcity Shock

4.11 - 1251 ratings - Source



How does a commodity market adjust to a temporary scarcity shock which causes a shift in the slope of the futures price curve? We find long-run relationships between spot and futures prices, inventories and interest rates, which means that such shocks lead to an adjustment back towards a stable equilibrium. We find evidence that the adjustment is somewhat consistent with well-known theoretical models, such as Pindyck (2001); in other words, spot prices rise and then fall, while inventories are used to absorb the shock. Importantly, the pace and nature of the adjustment depends upon whether inventories were initially high or low, which introduces significant nonlinearities into the adjustment process.The source of the base metals spot prices, futures prices, and inventories data is the London Metal Exchange (LME) which accounts for the largest share of trading in base metal spot and futures markets. For example, about 95 percent of theanbsp;...


Title:How Commodity Price Curves and Inventories React to a Short-Run Scarcity Shock
Author: Ms. Nese Erbil, Shaun K. Roache
Publisher:International Monetary Fund - 2010-09-01
ISBN-13:

You must register with us as either a Registered User before you can Download this Book. You'll be greeted by a simple sign-up page.

Once you have finished the sign-up process, you will be redirected to your download Book page.

How it works:
  • 1. Register a free 1 month Trial Account.
  • 2. Download as many books as you like (Personal use)
  • 3. Cancel the membership at any time if not satisfied.


Click button below to register and download Ebook
Privacy Policy | Contact | DMCA