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Do International Relative Commodity Prices Support the Prebisch-Singer Hypothesis? A Nonlinear Panel Unit Root Testing

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  • Murat ASLAN

    (Department of Economics, Yildirim Beyazit University, Ankara, Turkey.)

  • Saban NAZLIOGLU

    (Department of Econometrics, Pamukkale University, Denizli, Turkey.)

Abstract

This study investigates whether shocks to the real international commodity prices are transitory or permanent within the context of the recent developments in panel unit root testing procedures. We employ a composite panel unit root procedure -incorporates nonlinearity, gradual structural shifts, and cross-section dependency- with a sequential panel selection model which classifies stationary and non-stationary series in the panel. The analysis covering 24 real commodity prices for 1900-2010 identifies that when the behavior of commodity prices is investigated under the composite panel unit root perspective, the number of trend-stationary series increased dramatically and revealed 16 out 24 commodity prices to be stationary. A more careful examination of the findings shows that the majority of stationary prices (11 out of 16) are for livestock and agricultural commodities. However, we find only partial support for the Prebisch-Singer Hypothesis, where only 7 out of 24 commodities display negative long-term trend.

Suggested Citation

  • Murat ASLAN & Saban NAZLIOGLU, 2018. "Do International Relative Commodity Prices Support the Prebisch-Singer Hypothesis? A Nonlinear Panel Unit Root Testing," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 76-92, December.
    • Handle: RePEc:rjr:romjef:v::y:2018:i:1:p:76-92
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    2. Ranjan Aneja & Arjun, 2022. "Impact of Terms of Trade on GDP in the Context of Prebisch–Singer Theorem: Evidence from Egypt and Guinea," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(5), pages 2561-2575, October.

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    More about this item

    Keywords

    commodity prices; unit root; structural shift; panel data;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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