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Threshold effects and unit roots of real commodity prices since the mid-nineteenth century

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  • Pedro Clavijo
  • Jacobo Campo
  • Henry Mendoza

Abstract

This paper investigates whether a unit root process and nonlinearities can characterize real commodity prices for six major primary goods. An unconstrained two-regime threshold autoregressive model is used with an autoregressive unit root. Among the main results, it is found that terms of trade for agricultural, mineral, non-tropical, and non-oil goods are nonlinear processes that are characterized by a unit root process. The finding of nonlinearities explains why the deterioration of the terms of trade has been episodic. Additionally, we found there is no statistical evidence supporting the Prebisch-Singer hypothesis for agricultural, mineral, non-tropical, and non-oil goods.

Suggested Citation

  • Pedro Clavijo & Jacobo Campo & Henry Mendoza, 2020. "Threshold effects and unit roots of real commodity prices since the mid-nineteenth century," Economics and Business Letters, Oviedo University Press, vol. 9(4), pages 342-349.
    • Handle: RePEc:ove:journl:aid:14455
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    File URL: https://reunido.uniovi.es/index.php/EBL/article/view/14455
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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