The metals price boom of 1987-89 : the role of supply disruptions and stock changes

The markets for base metals have changed remarkably in the last few years. A long period of extremely low prices was followed by a sustained price boom in 1987-89 - which continued into 1990 for copper, nickel, lead, and zinc. The author examines the causes of the price boom in terms of market fundamentals. Because of the importance of supply disturbances and low stocks, the reduced-form price equation specification was extended to incorporate supply-side variables. The resulting estimates exhibit superior fit and greater explanatory power than, for example, those of Gilbert's (1986) model. The estimates of the modeland simulations of the boom period with the model suggest the following: 1) The growth of OECD industrial production was the most important factor in the higher metals prices, 2) US dollar depreciation was the dominant contributor to the metals price increase during the earlier part of the boom, 3) supply disturbances and low stocks had positive impacts on the price increases, and 4) excessive market speculation exacerbated the price increases.Access to Markets,Economic Theory&Research,Mining&Extractive Industry (Non-Energy),Environmental Economics&Policies,Markets and Market Access

Rational expectations and commodity price forecasts

The main purpose of this paper is to take a new look at the commodity market (CM) price forecasts in light of recent investigations. The CM forecasts are similar in nature to the survey expectations in that both solicit market experts'opinions about future price developments. However, there are important differences: CM forecasts are more of the consensus-type forecasts than survey data and deal with physical goods that are subject to different risks and constraints. The characteristics of the CM forecasts are reviewed in relation to the futures prices of the same commodities. This paper also estimates the alternative expectational models and tests the rationality of the expectational behavior.Economic Forecasting,Economic Theory&Research,Environmental Economics&Policies,Access to Markets,Markets and Market Access

Global trends in raw materials consumption

This paper reviews movements in raw materials consumption over the past 30 years. Included in this review are all base metals and steel, and important agricultural raw materials. These primary commodities share the common characteristic that they are used as inputs in manufacturing and construction. Some metals and minerals, energy commodities, and timber products are not included in this review for various reasons. The period reviewed is from 1961 to 1988. A prominent characteristic of the metals market during the past 15 years has been its very slow growth. In some years consumption of several raw materials has even declined. Explaining the causes of this slowdown, in the face of moderate economic growth, has become a topical issue. The slowdown has important implications for a number of developing countries that rely heavily on exports of these materials. The severity and persistence of post-1973 declines in metals intensity per unit of GNP, prompted the conjecture that it may have been structural. This paper reviews the debate on this issue, including results of statistical tests. It also summarizes the trends in raw materials consumption and reviews the technological developments relating to raw materials consumption.Mining&Extractive Industry (Non-Energy),Montreal Protocol,Sanitation and Sewerage,Primary Metals,Environmental Economics&Policies

Commodity price forecasts and futures prices

The International Commodity Markets Division (CM) of the World Bank started forecasting primary commodity prices more than two decades ago. The forecast accuracy, or forecast biases and informational efficiency, has been a major concern and the subject of occasional retrospective studies. This paper explores the relationship between commodity futures prices and price expectations. It focuses of the usefulness of futures prices as a short-term price forecasting tool. In 1989, Froot and Frankel used survey data on exchange rate expectations to estimate the relative importance of risk premium and expectational error in explaining the forward discount biases in foreign exchange rates. They found that expectational errors dominate the forward discount bias and that the risk premium is small, relatively stable, and not correlated with the expectational error. This paper follows the Froot and Frankel analysis to see if commodity prices exhibit similar characteristics. It goes a step further and estimates a relationship between futures prices and price expectations. The paper summarizes the characteristics of the forecast and futures price data, tests the rationality of futures prices and decomposes the futures price bias. It also conducts direct statistical tests of the importance of risk premium and expectational error.Commodities,Access to Markets,Markets and Market Access,Environmental Economics&Policies,Economic Theory&Research

The Yahwism of Moses

Excerpt: The theme of the deliverance of Israel from bondage in Egypt not only provides the framework of the opening books of the Old Testament but is also recalled and emphasized in many other passages. Furthermore, one of the most fundamental and frequently repeated statements of faith in the Old Testament is that Yahweh; the God of Israel, is the one who led Israel out of Egypt. It is noteworthy that in this affirmation God is regularly the grammatical or, at least, the logical subject, and it is equally remarkable that Israel as a totality always appears as the object. To the act of God, expressed in this confessional statement, Israel traced its existence and its special place among the nations. Indeed, the expression \u27\u27Yahweh who brought Israel out of Egypt occurs in widely differing contexts in the Old Testament. This expression of the theme Guidance out of Egypt is unmistakably related to the background of all the texts in the Old Testament, even though it is not always mentioned directly

The Classification of Types of Business-to-Business Electronic Commerce: A Framework Construction

Based on the degree of information sharing between buyers and suppliers as well as the level of supplier power, we suggested a framework that can be useful for classifying types of business to business (B2B) electronic commerce (EC) in the manufacturing firms. According to this framework, four kinds of B2B EC were theoretically proposed, classified, and empirically confirmed. These four are: an electronic marketplace, electronic procurement, electronic partnerships, and electronic distribution. Many prior studies have investigated and proposed some kinds of B2B EC. However, these studies focused mostly on one or two types of B2B EC, and did not develop or suggest a framework for the classification of forms of B2B EC. The framework constructed in this research can be utilized variously. Specifically, when a firm wants to initiate B2B EC with its suppliers, this framework can help a firm to decide and select an appropriate kind of B2B EC. This framework can also be applied to evaluate whether the proper form of B2B EC has been adopted or not

Corporate Social Responsibility and Corporate Financial Performance: Evidence from Korea

This paper studies the empirical relation between corporate social responsibility (CSR) and corporate financial performance in Korea using a sample of 1122 firm-years during 2002-2008. We measure corporate social responsibility by both an equal-weighted CSR index and a stakeholder-weighted CSR index suggested by Akpinar et al. (2008). Corporate financial performance is measured by ROE, ROA and Tobin’s Q. We find a positive and significant relation between corporate financial performance and the stakeholder-weighted CSR index, but not the equal-weighted CSR index. This finding is robust to alternative model specifications and several additional tests, providing evidence in support of instrumental stakeholder theory.corporate social responsibility; corporate financial performance; KEJI index; instrumental stakeholder theory

The precautionary demand for commodity stocks

This paper develops a theory of the precautionary demand for commodity stocks. It suggests that commodity stocks are held for precautionary purposes by producers, consumers, and intermediate processors, while speculators hold stocks on the expectation of capital gains from a subsequent price rise. Producer and consumer stocks usually account for the largest share of commercial stocks held at any point in time. For example, at the end of 1990, stocks held by producers and consumers of copper were 72 percent of all commercial stocks of the market economy countries. Yet, the theory explaining the behavior of this class of stocks has not progressed much beyond the concept of convenience yield, first introduced by Kaldor (1939). This paper proposes an alternative theory. Holding of stocks by producers and consumers is viewed as precautionary behavior towards output and price risks. As a theory of behavior towards risks, the precautionary stock demand model encompasses speculative demand by both producers and consumers. Furthermore, both stocks and futures are treated as precautionary instruments, in contrast to the dichotomy that only stocks provide convenience yield while futures are hedging instruments.Access to Markets,Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies,Non Bank Financial Institutions

Structural changes in metals consumption

For 15 years the metals market has been characterized by slow growth - in some cases, even decline - in consumption. To test the proposition that structural changes in demand were the main cause of the slowdown, the author - drawing on U.S. data - uses an extended metals demand model that recognizes energy, labor, capital, and other materials as major inputs. The traditional model explains metals consumption in terms only of output and the prices of metal and its substitutes. It is inadequate to address the issue of structural change because it ignores other factors of production, such as energy, which have experienced dramatic changes. With the extended model, the null hypothesis of no structural change cannot be rejected for most metals. With the conventional model, the null hypothesis of no structural change is strongly rejected. Results with the extended model show that the downturn can be explained mostly by changes in the input variables, particularly such nonmetal inputs as capital and energy, which are much more important cost items than metals and have undergone drastic cost changes over the period.Environmental Economics&Policies,Economic Theory&Research,Montreal Protocol,Mining&Extractive Industry (Non-Energy),Primary Metals