Explaining recent metals price swings: Exchange rates and structural considerations

Abstract

Movements of metals prices in the 1980s have often appeared to be ‘out of synch’ with economic developments. A model relating metals prices to exchange rates in industrial consumer countries and developing producer countries is presented. Structural supply and demand responses are considered. The diverse exchange rate movements and structural supply-demand adjustments help to explain the fall of prices in the first seven years of the decade and, more recently, the run up of the dollar prices of copper and other non-ferrous metals.