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Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis

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  • Cuddington, John T

Abstract

Following the Boskin et al., (1996) report, it became widely recognized that price indexes in the U.S. and elsewhere overstate inflation. Svedberg and Tilton (2006) highlighted that this inflation bias may have important implications for estimated long-term trends in nonrenewable resource prices. ST construct an inflation-bias corrected CPI (and PPI) for the U.S. and use their corrected deflator(s) to define a so-called 'real real' price of copper. Their 'real real' price of copper is then used to re-estimate long-term trends in real copper prices. This paper proposes a quick method for obtaining inflation-bias-corrected estimates of long-run trends in real primary commodity prices directly from estimates in the published literature. Our approach obviates the need re-do existing empirical studies using a corrected or 'real real' price of nonrenewable resources. The two approaches are mathematically equivalent.

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  • Cuddington, John T, 2010. "Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis," Resources Policy, Elsevier, vol. 35(2), pages 72-76, June.
    • Handle: RePEc:eee:jrpoli:v:35:y:2010:i:2:p:72-76
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    1. Robert J. Gordon, 2006. "The Boskin Commission Report: A Retrospective One Decade Later," International Productivity Monitor, Centre for the Study of Living Standards, vol. 12, pages 7-22, Spring.
    2. Svedberg, Peter & Tilton, John E., 2006. "The real, real price of nonrenewable resources: copper 1870-2000," World Development, Elsevier, vol. 34(3), pages 501-519, March.
    3. Gordon, Robert-J, 1999. "The Boskin Commission Report and Its Aftermath," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 41-68, December.
    4. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," The World Bank Economic Review, World Bank, vol. 2(1), pages 1-47, January.
    5. Cuddington, John T., 1992. "Long-run trends in 26 primary commodity prices : A disaggregated look at the Prebisch-Singer hypothesis," Journal of Development Economics, Elsevier, vol. 39(2), pages 207-227, October.
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    2. Thomas H.W. Ziesemer, 2014. "Country terms of trade: trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(6), pages 767-796, September.
    3. Manuel Landajo & Mar'ia Jos'e Presno, 2024. "The prices of renewable commodities: A robust stationarity analysis," Papers 2402.01005, arXiv.org.
    4. Fernandez, Viviana, 2012. "Trends in real commodity prices: How real is real?," Resources Policy, Elsevier, vol. 37(1), pages 30-47.
    5. Fernandez, Viviana, 2015. "Commodity price excess co-movement from a historical perspective: 1900–2010," Energy Economics, Elsevier, vol. 49(C), pages 698-710.
    6. Fernandez, Viviana, 2014. "Linear and non-linear causality between price indices and commodity prices," Resources Policy, Elsevier, vol. 41(C), pages 40-51.
    7. Biswas, Pritam & Sinha, Rabindra Kumar & Sen, Phalguni, 2023. "A review of state-of-the-art techniques for the determination of the optimum cut-off grade of a metalliferous deposit with a bibliometric mapping in a surface mine planning context," Resources Policy, Elsevier, vol. 83(C).
    8. József Popp & Judit Oláh & Mária Farkas Fekete & Zoltán Lakner & Domicián Máté, 2018. "The Relationship Between Prices of Various Metals, Oil and Scarcity," Energies, MDPI, vol. 11(9), pages 1-19, September.
    9. Tapia Cortez, Carlos A. & Hitch, Michael & Sammut, Claude & Coulton, Jeff & Shishko, Robert & Saydam, Serkan, 2018. "Determining the embedding parameters governing long-term dynamics of copper prices," Chaos, Solitons & Fractals, Elsevier, vol. 111(C), pages 186-197.
    10. Manuel Landajo & María José Presno, 2022. "The prices of renewable commodities: a robust stationarity analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(2), pages 447-470, April.
    11. Tapia, Carlos & Coulton, Jeff & Saydam, Serkan, 2020. "Using entropy to assess dynamic behaviour of long-term copper price," Resources Policy, Elsevier, vol. 66(C).
    12. C. A. Tapia Cortez & J. Coulton & C. Sammut & S. Saydam, 2018. "Determining the chaotic behaviour of copper prices in the long-term using annual price data," Palgrave Communications, Palgrave Macmillan, vol. 4(1), pages 1-13, December.
    13. Svedberg, Peter & Tilton, John E., 2011. "Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis," Resources Policy, Elsevier, vol. 36(1), pages 91-93, March.
    14. Henckens, M.L.C.M. & Driessen, P.P.J. & Ryngaert, C. & Worrell, E., 2016. "The set-up of an international agreement on the conservation and sustainable use of geologically scarce mineral resources," Resources Policy, Elsevier, vol. 49(C), pages 92-101.
    15. Henckens, M.L.C.M. & van Ierland, E.C. & Driessen, P.P.J. & Worrell, E., 2016. "Mineral resources: Geological scarcity, market price trends, and future generations," Resources Policy, Elsevier, vol. 49(C), pages 102-111.

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