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Long-Run Prices of Primary Commodities and Oil Prices

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Chaudhuri, Kausik

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Abstract

Acutely volatile movements in primary commodity prices have drawn considerable interest from empirical researchers. Exports of these commodities account for the bulk of export earnings of developing countries. The traditional demand-based framework was unable to explain the marked deterioration in these prices during the 1980s. This paper tries to ascertain the role played by real oil prices in explaining the extremely volatile movements in real prices of primary commodities by taking into account oil price shocks over the period 1973-96, using monthly data. Real primary commodity prices and real oil prices are cointegrated. Additionally, the error in the cointegrating relation stimulates real commodity price adjustment, not real oil price adjustment. Copyright 2001 by Taylor and Francis Group

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Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 33 (2001)
Issue (Month): 4 (March)
Pages: 531-38
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Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:531-38

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Powell, Andrew, 1991. "Commodity and Developing Country Terms of Trade: What Does the Long Run Show?," Economic Journal, Royal Economic Society, vol. 101(409), pages 1485-96, November. [Downloadable!] (restricted)
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  3. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 8909, Institut National de la Statistique et des Etudes Economiques-.
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  4. Burbidge, John & Harrison, Alan, 1984. "Testing for the Effects of Oil-Price Rises Using Vector Autoregressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 459-84, June. [Downloadable!] (restricted)
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  8. Eduardo Borensztein & Carmen Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Working Papers 94/9, International Monetary Fund.
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  13. Spraos, John, 1980. "The Statistical Debate on the Net Barter Terms of Trade between Primary Commodities and Manufactures," Economic Journal, Royal Economic Society, vol. 90(357), pages 107-28, March. [Downloadable!] (restricted)
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  18. 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. [Downloadable!] (restricted)
  19. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Valeria Costantini & Francesco Gracceva, 2004. "Social Costs of Energy Disruptions," Working Papers 2004.116, Fondazione Eni Enrico Mattei. [Downloadable!]
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