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Price formation and price trends in exhaustible resource markets Evidence and explanations.ppt

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Price formation and price trends in exhaustible resource markets Evidence and explanations.ppt Powered By Docstoc
					      Price formation and price trends in
    exhaustible resource markets: Evidence
               and explanations

                                 By
                          MARIAN RADETZKI
                        Professor of Economics
                    Luleå University of Technology


MarianCUTS 22 Sept 2011
                                                     1
      Themes covered by paper
          (Themes also covered by talk)

ØThe long run price equilibrium: Why is it falling?
ØThe anatomy of resource booms
Ø”Speculation” and resource prices: What do we know about
the relationship?
ØMonopolistic management of exhaustible resource markets
ØNational dependence on exhaustible resource production
and trade: The Dutch Disease and the Resource Curse


                                                            2
 Short run price determination              Long run price determination


                                           P
P

                            S


                                                          D2

                                                D1
P3


                                           P2                              S
                                           P1
P2

P1                                    D3
                                 D2
                      D1

                 Q1    Q2 Q3           Q             Q1        Q2              Q

                                                                               3
      ”Developing Asia” dominates the
       growth of commodity demand
                                                Developing Asia OECD
Share of global BNP                                24%            52%
Assumed marginal raw materials intensity            2               1
With the same economic growth rates, both regions will contribute equally
to commodiy demand expansion.
But economic growth in Dev Asia 2001-2010 was 5.3 times the growth rate in
OECD.
Conclusion: Dev Asia’s contribution to global commodity demand expansion
was five times as high as that of the OECD.
During the acute phase of the financial crisis, 2008-2010, the OECD
economies expanded by -0.1%/year; those in Dev Asia by 8.1%/year.
The crisis and stagnation in the OECD region has had an imperceptible
impact on commodity demand. That explains price recovery as aoon as it
became clear that Dev Asia would remain unaffected by the crisis.

                                                                             4
Commodity prices, monthly $ index, 2003=100
 Markets with futures      Markets without futures




Source: IMF.



                                                     5

				
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