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Working papersEduardo Pedreira, Miguel A. Canela
  • The cyclical behavior of commodities has undergone a deep transformation in recent years. The data analyzed confirm that between 1960 and 1999 commodity-price cycles showed negative asymmetry. Or in other words, recessive periods tended to last longer and their absolute change in price was higher than in the expansions. However, when the analysis includes the recent years (up to 2010) this negative asymmetry practically disappears due to the strong positive asymmetry registered in the last years.

  • Besides the change occurred in the behavior of individual cycles, this note investigates the degree of correlation or synchronization (comovement) among the evolution of different commodity-price cycles. The results indicate that the level of comovement is statistically significant and not constant over time.

  • Even though the objective of this study is far from exploring which variables underpinned these changes, the factors that presumably have led to the reconfiguration of the commodity cycles are numerous. Among them we can mention the strong reduction in the volatility of key economic variables, the emergence of China in world trade, the greater integration and extensive development of international capital markets, the high financial innovation, automation and standardization of operations and the use of raw materials as an asset class. All these issues help to explain the new cyclical behavior.