Natural resource prices: will they ever turn up?
AbstractHotelling'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.
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Bibliographic InfoPaper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt75g2c8g8.
Date of creation: 01 Mar 1995
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arima models; natural resources; simulation methods;
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