Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the Stationarity of Exhaustible Natural Resource Prices

Contents:

Author Info

  • Nikolaos Kourogenis

    ()
    (Department of Banking and Financial Management, University of Piraeus.)

  • Phoebe Koundouri

    (Dept. of International and European Economic Studies, Athens University of Economics and Business)

Abstract

In this paper we examine whether the real prices of eleven natural resource commodities exhibit stochastic or deterministic trends. A common methodological feature in the relevant empirical literature, most of which published in the Journal of Environmental Economics and Management, has been so far the application of univariate tests for unit roots. In these tests the real price for each commodity is tested for unit roots in isolation from all other natural resource commodity prices. We claim that this approach is likely to produce spurious inferences concerning the true number of unit roots, since it ignores any possible dynamic interactions among the available set of nominal prices. We suggest that the hypothesis of stationarity of real commodity prices should be properly defined and tested within a multivariate error correction model, which explicitly accounts for all possible linear interdependencies among the series involved. In such a framework, the stationarity of the real prices that participate in the system depends on whether the system exhibits sufficient cointegration with a specific cointegration matrix. Our empirical results suggest that within this multivariate framework, eight of eleven real prices of exhaustible natural resource commodities satisfy the restrictions for being stationary. On the contrary, all of these eleven real prices appear to be non-stationary, when the unit root hypothesis is tested in the context of incomplete models.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://wpa.deos.aueb.gr/docs/NatResTrendBlinded.pdf
File Function: First version
Download Restriction: no

Bibliographic Info

Paper provided by Athens University of Economics and Business in its series DEOS Working Papers with number 1022.

as in new window
Length:
Date of creation:
Date of revision:
Handle: RePEc:aue:wpaper:1022

Contact details of provider:
Postal: 76, Patission Street, Athens 104 34
Phone: (+301) 8214021
Fax: (301) 8214021
Web page: http://deos.aueb.gr/
More information through EDIRC

Related research

Keywords: Natural resource commodity prices; Cointegration; Trend stationarity; Vector error correction model;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Cavaliere, Giuseppe & Taylor, A.M. Robert, 2007. "Testing for unit roots in time series models with non-stationary volatility," Journal of Econometrics, Elsevier, vol. 140(2), pages 919-947, October.
  2. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
  3. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  4. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  5. Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June.
  6. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, 09.
  7. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  9. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  10. Berck, Peter & Roberts, Michael, 1996. "Natural Resource Prices: Will They Ever Turn Up?," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 65-78, July.
  11. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
  12. Margaret E. Slade & Henry Thille, 1997. "Hotelling Confronts CAPM: A Test of the Theory of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 685-708, August.
  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  14. Ahrens, W. Ashley & Sharma, Vijaya R., 1997. "Trends in Natural Resource Commodity Prices: Deterministic or Stochastic?," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 59-74, May.
  15. Smith, V Kerry, 1979. "Natural Resource Scarcity: A Statistical Analysis," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 423-27, August.
  16. Slade, Margaret E., 1988. "Grade selection under uncertainty: Least cost last and other anomalies," Journal of Environmental Economics and Management, Elsevier, vol. 15(2), pages 189-205, June.
  17. Cynthia Lin, C.-Y. & Wagner, Gernot, 2007. "Steady-state growth in a Hotelling model of resource extraction," Journal of Environmental Economics and Management, Elsevier, vol. 54(1), pages 68-83, July.
  18. Junsoo Lee & John A. List & Mark Strazicich, 2005. "Nonrenewable Resource Prices: Deterministic or Stochastic Trends?," NBER Working Papers 11487, National Bureau of Economic Research, Inc.
  19. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aue:wpaper:1022. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekaterini Glynou).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.