COMMODITIES STILL IN CRISIS? by David Sapsford and Stephan Pfaffenzeller University of Liverpool and...

COMMODITIES STILL IN CRISIS?COMMODITIES STILL IN CRISIS?

byby

David Sapsford and Stephan PfaffenzellerDavid Sapsford and Stephan PfaffenzellerUniversity of LiverpoolUniversity of Liverpool

andand

Harry BlochHarry BlochCurtin UniversityCurtin University

Perth, Western AustraliaPerth, Western Australia

Presentation for Presentation for Workshop in Honour of Alf MaizelsWorkshop in Honour of Alf Maizels, SOAS, London, SOAS, London 19-20 19-20thth September 2008 September 2008

Alf Maizels: Commodity EconomistAlf Maizels: Commodity Economist

Major ContributionsMajor Contributions

Commodities in Crisis (1992)Commodities in Crisis (1992)

Maizels (1987)Maizels (1987)

Maizels (1994)Maizels (1994)

Maizels, Bacon and Mavrotas (1997)Maizels, Bacon and Mavrotas (1997)

ANALYTICAL APPROACHANALYTICAL APPROACH

‘‘FRAMEWORK’ (1984)FRAMEWORK’ (1984)

Rejection of Neo-Classical ApproachRejection of Neo-Classical Approach

Central Emphasis: Market PowerCentral Emphasis: Market Power Bargaining strengths of TNCs relative to host country governments and Bargaining strengths of TNCs relative to host country governments and

firms firms ViableViable Policy always firmly centre-stage Policy always firmly centre-stage Saw theory as servant of reality rather than vice versa!Saw theory as servant of reality rather than vice versa!

Forever conscious of the realities of the world we actually live inForever conscious of the realities of the world we actually live in

COMMODITIES IN CRISIS: PRICE COLLAPSE COMMODITIES IN CRISIS: PRICE COLLAPSE OF THE 1980s OF THE 1980s

1980s Experience versus 1970s and 1930s1980s Experience versus 1970s and 1930s

Statistical Awareness! (AER, 1968)Statistical Awareness! (AER, 1968) Time-series issuesTime-series issues

Trend versus short-term price instabilitiesTrend versus short-term price instabilitiesCycles of varying wave-lengthsCycles of varying wave-lengthsLong versus short wavesLong versus short wavesAggregation issuesAggregation issues

Commodity Index - Real Price

0

0.5

1

1.5

2

1900 1911 1922 1933 1944 1955 1966 1977 1988 1999

Real Commodity Prices 1900-2007

0

0.5

1

1.5

2

1900

1906

1912

1918

1924

1930

1936

1942

1948

1954

1960

1966

1972

1978

1984

1990

1996

2002


00.20.40.60.81

1.21.41.6


00.20.40.60.81

1.21.41.6

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

CRISIS HYPOTHESIS RECONSIDERED: SAMPLE CRISIS HYPOTHESIS RECONSIDERED: SAMPLE SELECTIONSELECTION

Maizels (1992) – All CommoditiesMaizels (1992) – All Commodities

Maizels (1994) – Food, Tropical Beverages, Maizels (1994) – Food, Tropical Beverages, Vegetable Oilseeds & Oil, Minerals Ores and MetalsVegetable Oilseeds & Oil, Minerals Ores and Metals

Maizels, Bacon and Mavrotas (1997) – Cocoa, Maizels, Bacon and Mavrotas (1997) – Cocoa, Coffee and TeaCoffee and Tea

CRISIS HYPOTHESIS RECONSIDERED: CRISIS HYPOTHESIS RECONSIDERED: ANALYSISANALYSIS

Some Econometric IssuesSome Econometric Issues

Trend (Trend (andand Instability) Instability)

Estimation ProceduresEstimation Procedures

Post-Sample EvidencePost-Sample Evidence

Structural Breaks, Dummy Variables and ‘Year (n-1)’Structural Breaks, Dummy Variables and ‘Year (n-1)’

THE EVIDENCETHE EVIDENCE InterpretationInterpretation

ChinaChina

Other EvidenceOther Evidence

Country-specific evidenceCountry-specific evidence

Pre-1900 EvidencePre-1900 Evidence

CONCLUSIONCONCLUSION

• Thank you for your attentionThank you for your attention

COMMODITIES STILL IN CRISIS? by David Sapsford and Stephan Pfaffenzeller University of Liverpool and...

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