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How Persistent Are Shocks to World Commodity Prices?

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  • Hong Liang
  • C. John McDermott
  • Paul Cashin

Abstract

This paper examines the persistence of shocks to world commodity prices, using monthly IMF data on primary commodities between 1957–98. We find that shocks to commodity prices are typically long–lasting and the variability of the persistence of price shocks is quite wide. The paper also discusses the implications of these findings for national and international schemes to stabilize earnings from commodity exports and finds that if price shocks are long–lived, then the cost of stabilization schemes will likely exceed any associated smoothing benefits.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/80.

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Length: 54
Date of creation: 01 Jun 1999
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Handle: RePEc:imf:imfwpa:99/80

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  1. Gilbert, Christopher L., 1996. "International Commodity Agreements: An obituary notice," World Development, Elsevier, Elsevier, vol. 24(1), pages 1-19, January.
  2. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers, Princeton, Woodrow Wilson School - Development Studies 145, Princeton, Woodrow Wilson School - Development Studies.
  3. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, Econometric Society, vol. 60(2), pages 423-33, March.
  4. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(5), pages 865-90, October.
  5. Beckerman, Wilfred & Jenkinson, Tim, 1986. "What Stopped the Inflation? Unemployment of Commodity Prices?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 96(381), pages 39-54, March.
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  7. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 139-65, January.
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  10. Carmen M. Reinhart & Peter Wickham, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 175-213, June.
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  14. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(5), pages 893-920, October.
  15. Peter Wickham & Carmen Reinhart, 1994. "Commodity Prices," IMF Working Papers 94/7, International Monetary Fund.
  16. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
  17. Bardsley, Peter, 1994. "The Collapse of the Australian Wool Reserve Price Scheme," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(426), pages 1087-1105, September.
  18. Eduardo Borensztein & Peter Wickham & Mohsin S. Khan & Carmen Reinhart, 1994. "The Behavior of Non-Oil Commodity Prices," IMF Occasional Papers 112, International Monetary Fund.
  19. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 277-301, March.
  20. Reinhart, Carmen & Wickham, Peter, 1994. "Non-oil commodity prices: Cyclical weakness or secular decline?," MPRA Paper 13871, University Library of Munich, Germany.
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