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The Relative Volatility of Commodity Prices

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Author Info

  • Rabah Arezki
  • Daniel Lederman
  • Hongyan Zhao

Abstract

This paper studies the volatility of commodity prices on the basis of a large dataset of monthly prices observed in international trade data from the United States over the period 2002 to 2011. The conventional wisdom in academia and policy circles is that primary commodity prices are more volatile than those of manufactured products, even though most of the existing evidence does not actually attempt to measure the volatility of prices of individual goods or commodities. Rather the literature tends to focus on trends in the evolution and volatility of ratios of price indexes composed of multiple commodities and products. This approach can be misleading. Indeed, the evidence presented in this paper suggests that on average prices of individual primary commodities may be less volatile than those of individual manufactured goods.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/279.

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Length: 23
Date of creation: 01 Dec 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/279

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Related research

Keywords: Capital goods; Manufacturing; commodity prices; foreign trade; standard deviations; international trade; standard deviation; cumulative distribution function; statistics; measurement errors; statistic; trade classification; trade data; measurement error; import quantities; measures of dispersion; import prices; product differentiation; world market; outliers; import value; price fluctuations; export markets; time series; market integration; survey; terms of trade; measures of volatility; domestic prices; world market integration; predictions;

This paper has been announced in the following NEP Reports:

References

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  1. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
  2. Garry F. Barrett & Stephen G. Donald, 2003. "Consistent Tests for Stochastic Dominance," Econometrica, Econometric Society, vol. 71(1), pages 71-104, January.
  3. Anthony J. Venables & William Maloney & Ari Kokko & Claudio Bravo Ortega & Daniel Lederman & Roberto Rigobón & José De Gregorio & Jesse Czelusta & Shamila A. Jayasuriya & Magnus Blomström & L. Coli, . "Natural Resources: Neither Curse nor Destiny," IDB Publications 59538, Inter-American Development Bank.
  4. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
  5. Paul Cashin & C. John McDermott, 2001. "The Long-Run Behavior of Commodity Prices," IMF Working Papers 01/68, International Monetary Fund.
  6. Daniel Lederman & William F. Maloney, 2007. "Natural Resources : Neither Curse nor Destiny," World Bank Publications, The World Bank, number 7183, October.
  7. Calvo-Gonzalez, Oscar & Shankar, Rashmi & Trezzi, Riccardo, 2010. "Are commodity prices more volatile now ? a long-run perspective," Policy Research Working Paper Series 5460, The World Bank.
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