The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability
AbstractUsing the longest dataset publicly available (The Economist's index of industrial commodity prices), we analyze the behavior of real commodity prices over the period 1862-1999 and have two main findings. First, while there has been a downward trend in real commodity prices of about 1 percent per year over the last 140 years, little support is found for a break in the long-run trend decline in commodity prices. Second, there is evidence of a ratcheting up in the variability of price movements. The amplitude of price movements increased in the early 1900s, while the frequency of large price movements increased after the collapse of the Bretton Woods regime of fixed exchange rates in the early 1970s. Although there is a downward trend in real commodity prices, this is of little practical policy relevance, since it is smalll and completely dominated by the variability of prices. Copyright 2002, International Monetary Fund
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Bibliographic InfoArticle provided by Palgrave Macmillan in its journal IMF Staff Papers.
Volume (Year): 49 (2002)
Issue (Month): 2 ()
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Other versions of this item:
- Paul Cashin & C. John McDermott, 2001. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Working Papers 01/68, International Monetary Fund.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
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