THE WORLD TIN ECONOMY: AN ECONOMETRIC ANALYSIS

Abstract

An econometric model of the world tin economy using a disaggregated supply/demand approach with a market clearing equation for prices is described. Six developing countries, Malaysia, Bolivia, Indonesia, Thailand, Nigeria, and Zaire, produce approximately 70 percent of the world tin output. Consumption of tin is concentrated in developed countries. The United States is the single most important tin consuming country with a 25 percent share of total world consumption. Wide fluctuations in tin prices are caused largely by differences in the lag structure of tin consumption and tin mining. While tin consumption usually responds quickly to changes in income or economic activity, adjustments of mine output are costly and time consuming. Most of the behavior of the world tin economy is captured in the econometric model consisting of 23 behavioral equations. The model incorporates the two major institutional factors that influence the tin economy, the strategic tin stockpile in the United States and the International Tin Agreement. The model indicates that the cyclical behavior of tin prices is likely to continue in the future while tin producers can expect a period of slow but steady growth in import demand and a continued increase in tin prices.