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Natural resource prices: will they ever turn up?

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  • Berck, Peter
  • Roberts, Michael J.

Abstract

Hotelling's theory predicts that natural resource rents should increase over time. However, technical progress in resource extraction, environmental constraints, or great natural abundance could result in stagnant or declining product prices. Thus, there is no theoretical reason to believe that product prices will rise in the near future. The prediction of product prices by time-series methods is shown to depend critically upon whether the series are modeled as differenced or trend stationary. Dickey-Fuller and Lagrange Multiplier tests are used to show that the series are differenced stationary. Long- and short-sample series are tested. Trend-stationary modeling strongly predicts rising resource prices. The result from differenced-stationary modeling is that there is only a weak supposition that natural resource prices will rise.

Suggested Citation

  • Berck, Peter & Roberts, Michael J., 1995. "Natural resource prices: will they ever turn up?," CUDARE Working Papers 43908, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:43908
    DOI: 10.22004/ag.econ.43908
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    References listed on IDEAS

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    1. Hartwick, John M, 1978. "Exploitation of Many Deposits of an Exhaustible Resource," Econometrica, Econometric Society, vol. 46(1), pages 201-217, January.
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    4. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
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