Common Trends in Economic Activity and Metals Demand: Cointegration and the Intensity of Use Debate

This research examines whether a long-run stationary equilibrium relationship holds between aggregate income and consumption of various primary industrial metals. Using the theory of cointegrated processes, it is possible to determine if metals consumption and income follow a common stochastic trend, or whether the two variables tend to randomly drift apart over time. Little evidence is found to support the presence of a long-run equilibrium relationship between income and metals consumption. Given this result, researchers interested in estimation and inference based on reduced form, structural, or forecasting models of metals demand should be aware that standard econometric techniques may lead to false conclusions.