RONALD C. DUNCAN During the 1980s, substantial advances were made in the
global modelling of commodity markets in several areas, advances which
were reflected in many of the papers delivered to the Applied
Econometrics Association meeting held at the World Bank in Washington,
DC, in October 1988. The several areas where I see advances being made,
some of which the International Commodity Markets Division of the World
Bank has taken part in, are the following: (a) in the theoretical
specification of commodity price behaviour; (b) in the increased
emphasis on modelling imperfect markets; (c) in the incorporation of the
interrelationships between macro- economic and commodity market
variables; (d) in the specification of supply response, particularly in
respect of perennial crops; and (e) in the realization of
complementarity between time series analysis and economet- rically
estimated structural models. Improvements in the specification of the
commodity price formation process have probably been the most important
of the above advances. Until the early 1980s, prices were modelled as a
simple linear function of stocks. Gilbert has played an important role
in introducing the rational expecta- tions hypothesis into the
specification of commodity prices. Recent work by Gilbert, Trivedi, and
Deaton and Laroque offers the possibility of non-linear specification of
the relationship between prices and stocks within an expectational
framework and of thereby capturing the phenomenon of sharp run-ups in
commodity prices. Gilbert has also played an important role in
clarifying the interrelation- ships between macroeconomic variables and
primary commodity prices.
