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| Author: | Deaton, A. Laroque, G. |
| Title: | Competitive storage and commodity price dynamics |
| Journal: | Journal of Political Economy
1996 : OCT, VOL. 104:5, p. 897-923 |
| Index terms: | COMMODITY MARKETS SUPPLY AND DEMAND PRICE LEVEL |
| Language: | eng |
| Abstract: | By buying cheap and selling dear, risk-neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand. Commodity prices are variable and stronly positively correlated from one year to the next. The variability is often explained by supply factors, and the autocorrelation by the activities of speculators. We show that this explanation is not consistent with the evidence. Speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence, but not to the high levels that are observed in the data. |
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