Structural Breaks And Long-Run Trends In Commodity Prices
AbstractThe purpose of this paper is twofold: first, it tests the Prebisch-Singer hypothesis of a secular deteriorating trend, and, second, presents a time-series analysis of the dynamics of commodity prices. Using annual data for the 1900-92 period and employing recently developed econometric techniques, we show that 17 of the 24 commodity prices studied present negative long-run trends, three are trendless and four have positive trends. Contrary to previous findings, this evidence suggests that although the Prebisch-Singer hypothesis is not a universal phenomenon, it is the case of most commodities. Moreover, the estimated long-run persistence of commodity price shocks challenges the conventional policy recommendations to overcome the negative effects of price instability on economic performance. In several cases, the estimated persistence is much lower than previous empirical results, suggesting that commodity stabilization funds can be successful in smoothing export revenues. © 1997 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.
Volume (Year): 9 (1997)
Issue (Month): 3 ()
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Other versions of this item:
- Leon, Javier & Soto, Raimundo, 1995. "Structural breaks and long-run trends in commodity prices," Policy Research Working Paper Series 1406, The World Bank.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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