An econometric analysis of the world zinc market

Abstract

A fairly detailed market form of econometric model is built, based on the technological, behavioral and institutional features of the world zinc industry. An estimated version of the model indicates different systems of lag responses in the structures of demand and supply to the price of zinc, a very poor substitutability on the demand side, free market price as a long-run equilibrator for the U.S. producers' price, and an important influence of the U.S. interventions on the world market. The model meets reasonably well the predictability criterion based on the technique of dynamic simulation. The performance properties of the world zinc industry, analysed through dynamic multiplier simulation technique, show that the industry exhibits a reasonably, stable market environment to the exogenous disturbances such as an increase in the activity levels of consumers and variations in the prices of substitutes. It is, however, quite sensitive to technological changes in the consumer industries. The stockpile policy of the U.S. Government does not seem to be properly geared to its objectives and, in general, it seems to have restricted the development of the industry as a whole.