Econometric analysis of the behavior of natural resource prices. Final report. [Interest-rate effects]
The findings of an econometric analysis of the relationship between the rates of change in mineral's prices and the rate of interest are reported. The rationale for this specification results from micro models of the behavior of a firm extracting an ore from a finite stock. This empirical analysis considers the movements in 12 minerals, including both metals and fuels, and three aggregate price indexes over the period 1900 to 1973. Five interest-rate series, distinguished according to the risk and degree of liquidity of their assets, were each considered for each of the price series. The econometric analysis involved extensive searching of alternative specifications of the relationship between the rates of change in the natural resource's price and functions of each interest rate. Econometric models within five general classes were considered to allow for the effects of expectations through the variety of lag structures considered and for comparability in risk and liquidity of holding a mineral. These final models were estimated over a part of the sample period and evaluated by their forecasting performance outside the sample period. In order to gauge the contribution of economic theory underlying these models, they were each compared with the forecasting performance of naive time-series models.
- Research Organization:
- Resources for the Future, Inc., Washington, DC (USA)
- OSTI ID:
- 5436890
- Report Number(s):
- EPRI-EA-1356
- Country of Publication:
- United States
- Language:
- English
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