 The metals price boom of 1987-89: the role of supply disruptions and stock changesBoum-Jong Choe No 542, Policy Research Working Paper Series from The World Bank Abstract: 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. Keywords: Access to Markets; Economic Theory&Research; Mining&Extractive Industry (Non-Energy); Environmental Economics&Policies; Markets and Market Access (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:542 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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