Friday, January 18, 2008
What's going on with the PPI? A problem for stimulating student learning.
What does this attached graphic tell you... intriguing anomaly or danger sign?
This graphic shows a huge run-up in the PPI and an increasing volatility. What is the underlying cause of this increasing volatility? Does this portray the normal functions of markets? Is it unstable? Perhaps the source is oil. Maybe it is rare metals. One possible source is in the agriculture sector:
"Continued speculation and skyrocketing commodity prices also threaten the business of agriculture. We've got all the makings for the destruction of the marketplace here." Rich Sauder, manager of the Tremont Cooperative Grain Company, says this as reported in
Commodity prices in 'Star Trek' land (January 15, 2008) by Steve Tarter
of the Journal Star (PEORIA).
I thing the graph holds a terrific problem for economic students. This will exercise their inductive powers and how they might solve the problem. This could be a nice authentic problem for some team based learning from the lowest level of classes to graduate students in time-series econometrics.
The data are from economagic.com. This great resource offers free access for economics instructors. (click here for the graph shown above)