Correlated shocks may reduce outcome correlations when outcomes are endogenous: a new paradox

Michael Beenstock ()
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Michael Beenstock: Hebrew University of Jerusalem

Economics Bulletin, 2019, vol. 39, issue 2, 1651-1655

Abstract: Correlated shocks normally increase correlations between outcomes. This note shows that when goods are substitutes in supply or demand, price correlations may vary inversely with the correlation between their shocks. This new paradox is explained.

Keywords: correlated shocks; price correlation; new paradox (search for similar items in EconPapers)
JEL-codes: C4 D4 (search for similar items in EconPapers)
Date: 2019-06-23
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