A simulation model for copper
Date
1982-07
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Abstract
The present interest to build a simulation model for copper exports came about partly because of the vogue over econometric commodity studies, and also because the current experience of copper companies as producers of a traditional commodity is both prevalent relative to the experience of producers of the other traditional exports, at the same time unique with regards to its being a capital-intensive industry.
The basic criterion to validate the models surveyed here and that which was developed later was the ex-post simulation method where the model able to produce the computed estimates of copper exports with the least variance from the actual series of exports was valued as 'best'.
The 'best' model indicated that Philippine copper exports supply is largely vulnerable to the activity index of only one market, which is Japan and that the real growth of exports in the future shall be pursued at the expense of the decreasing real copper price.
The pressure on copper companies is strong because their sunk costs and fixed investments are substantial. The writer, addressing both the copper companies and the government, suggested ways to possibly mitigate the ill effects of the validated structure on future operations.