High and volatile prices of major commodities have generated a wide array of analyses and policy prescriptions, including influential studies identifying price bubbles in periods of high volatility. Here we consider a model of the market for a storable commodity in which price expectations are...

This paper develops a model to analyze information aggregation in commodity markets. Through centralized trading, commodity prices aggregate dispersed information about the strength of the global economy among goods producers whose production has complementarity, and serve as price signals to...

The present value model relates an asset's price to the sum of its discounted expected future payoffs. I explore the limits of the model by testing its ability to explain the pricing of storable commodities. For commodities the payoff stream is the convenience yield that accrues from holding...

This paper examines product markets in which long-term contracts and spot transactions coexist. Such markets are characterized by "multiple-price systems," wherein adjustment to supply and demand shocks occurs through spot prices, while contract prices are fixed, or adjust slowly. We derive the...

This paper explores the relationship between the closely linked concepts of E-stability and least-squares learnability, featured in recent work by Evans and Honkapohja (1999, 2001), and the minimum-state-variable (MSV) solution defined by McCallum (1983) and used by many researchers for rational...

The paper presents an intertemporal general equilibrium model with rationing in the product market, in which stationary sunspot equilibria are shown to exist, indicating the possibility of fluctuations in economic activity simply due to self-fulfilling variations in economic agents'...

Movements in asset prices are a major risk confronting individuals. This paper establishes new asset pricing results when agents differ in risk preference, time preference and/or expectations. It shows that risk tolerance is a critical concept driving savings decisions, consumption allocations,...

We formalize the Keynesian insight that aggregate demand driven by sentiments can generate output fluctuations under rational expectations. When production decisions must be made under imperfect information about demand, optimal decisions based on sentiments can generate stochastic...