A Simple Mineral Market Model: Can it produce Super Cycles in prices?

John Cuddington and Abdel M. Zellou ()
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Abdel M. Zellou: Independent Petroleum Consultant

No 2012-05, Working Papers from Colorado School of Mines, Division of Economics and Business

Abstract: This paper develops a stylized supply-demand model for a mineral / nonrenewable commodity. It embodies important distinctions between short-run and long-run mineral supply and the derived demand for minerals as intermediate goods in production sectors with differing intensities of use. This framework is used to address the question: under what conditions might one expect to observe super cycles (i.e. cycles with a period of 20-70 years) in minerals prices? A plausible time path for GDP growth and the structural transformation that accompanies economic development in an emerging region is specified. Using these drivers and reasonable supply and demand parameters, price dynamics are simulated. The result is an asymmetric price cycle with a peak price that is about 250% above trend and an expansion phase that lasts for about 20 years. Thus, this simple model is capable of producing a single cycle with a frequency and amplitude in the range estimated in the empirical literature on super cycles. As other regions reach the development `take-off' phase, additional super cycles should emerge.

Keywords: Super Cycles; Long Cycles; Metal Markets; Metals' Intensity of Use (search for similar items in EconPapers)
JEL-codes: E22 E32 E37 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2012-07
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://econbus-papers.mines.edu/working-papers/wp201205.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: A simple mineral market model: Can it produce super cycles in prices? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:mns:wpaper:wp201205

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