Misalignment of Copper Price: 2002-2009

Eduardo Lopez; Lorena Palomeque S.

doi:10.4067/S0718-88702011000100004

Authors

Eduardo Lopez Banco Central de Chile
Lorena Palomeque S. Universidad Alberto Hurtado

DOI:

https://doi.org/10.4067/S0718-88702011000100004

Keywords:

Price of Copper, Global Demand, Error Correction Models

Abstract

Title: MISALIGNMENT OF COPPER PRICE: 2002-2009.

This paper analyzes copper price behavior during 2002-2009 while incorporating the role of fundamentals in its determination. The main conclusion is that fluctuations in the dollar, global demand and revisions to expectations about future prices are the main factors behind copper prices during that period. Purely financial factors seem to have a statistically significant impact only in the short term.

Downloads

Download data is not yet available.

References

Brunnermeier, M. (2008). Survey of bubbles. Princeton University. http://www.princeton.edu/~markus/

Brunnermeier, M., & Nagel, S. (2008). Hedge funds and the technology bubble. The Journal of Finance, 59(5), 2013–2040.

De Gregorio, J., González, H., & Jaque, F. (2005). Fluctuaciones del dólar, precio del cobre y términos de intercambio [Dollar fluctuations, copper prices, and terms of trade] (Documentos de Trabajo No. 310). Banco Central de Chile.

Diba, B., & Grossman, H. (1988). The theory of rational bubbles in stock prices. The Economic Journal, 98(392), 746–754. https://doi.org/10.2307/2233912

Froot, K., & Obstfeld, M. (1991). Intrinsic bubbles: The case of stock price. American Economic Review, 81, 1189–1214.

García, C., Jaramillo, P., & Selaive, J. (2006). Regularidades empíricas del entorno internacional de la economía chilena [Empirical regularities of the international environment of the Chilean economy] (Documentos de Trabajo No. 460). Banco Central de Chile.

Garino, G., & Sarno, L. (2004). Speculative bubbles in U.K. house prices: Some new evidence. Southern Economic Journal, 70(4), 777–795.

Ghosh, S., Gilbert, C. L., & Hughes Hallett, A. J. (1987). Stabilizing speculative commodity markets. Oxford University Press.

Gilbert, C. (1995). Modelling market fundamentals: A model of the aluminium market. Journal of Applied Econometrics, 10(4), 385–410. https://doi.org/10.1002/jae.3950100405

Gürkaynak, R. (2005). Econometric tests of asset price bubbles: Taking stock (Finance and Economics Discussion Series). Federal Reserve Board.

Hunter, W., Kaufman, G., & Pomerleano, M. (2005). Asset price bubbles: The implications for monetary, regulatory, and international policies. MIT Press.

Jaramillo, P., & Selaive, J. (2006). Actividad especulativa y precio del cobre [Speculative activity and the price of copper] (Documentos de Trabajo No. 384). Banco Central de Chile.

Johansen, S. (1996). Likelihood-based inference in cointegrated vector auto-regressive models. Oxford University Press.

Lehmann, S., Moreno, D., & Jaramillo, P. (2007). China, precios de commodities y desempeño de América Latina: Algunos hechos estilizados [China, commodity prices, and the performance of Latin America: Some stylized facts] (Documentos de Trabajo No. 424). Banco Central de Chile.

López, E., & Riquelme, V. (2010). Auge, colapso y recuperación de los precios de materias primas entre 2002 y 2010: ¿Qué hay detrás? [Boom, collapse, and recovery of commodity prices between 2002 and 2010: What is behind it?]. Revista de Economía Chilena, 13(2), 129–145.

Lord, M. (1991). Price formation in commodity markets. Journal of Applied Econometrics, 6(3), 239–254. https://doi.org/10.1002/jae.3950060303

McCallum, B. (1976). Rational expectations and the natural rate hypothesis: Some consistent estimates. Econometrica, 44(1), 43–52. https://doi.org/10.2307/1911379

Muth, J. F. (1961). Rational expectations and the theory of price movements. Econometrica, 29(3), 315–335. https://doi.org/10.2307/1909635

Pesaran, M. H., Shin, Y., & Smith, R. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616

Pieroni, L., & Ricciarelli, M. (2005). Testing rational expectations in primary commodity markets. Applied Economics, 37(15), 1705–1718. https://doi.org/10.1080/00036840500173205

Santos, M., & Woodford, M. (1997). Rational asset pricing bubbles. Econometrica, 65(1), 19–57. https://doi.org/10.2307/2171812

Scheinkman, J., & Xiong, W. (2003). Overconfidence and speculative bubbles. Journal of Political Economy, 111, 1183–1219.

Stock, S., & Watson, M. (1993). A simple estimator of cointegrating vector in higher order integrated systems. Econometrica, 61(4), 783–820. https://doi.org/10.2307/2951763

West, K. (1987). A specification test for speculative bubbles. The Quarterly Journal of Economics, 102(3), 553–580. https://doi.org/10.2307/1884217