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Hotelling Rules: Oscillatory Versus Quadratic Trends in Natural Resource Prices

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  • Antonios Antypas
  • Phoebe Koundouri
  • Nikolaos Kourogenis

Abstract

A model is introduced for the description of natural resourcesíprice paths, which, in contrast to the existing literature, captures non-linear trends by means of a simple trigonometric function. This model is then compared by means of a set of model selection criteria with a quadratic trend model and with a more general one that nests both models. All models are estimated on the price series of eleven major natural resources. In most cases, the trigonometric trend model is selected as the one better Ötting the data, providing evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications.

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Paper provided by Grantham Research Institute on Climate Change and the Environment in its series Grantham Research Institute on Climate Change and the Environment Working Papers with number 126.

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Date of creation: Aug 2013
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Handle: RePEc:lsg:lsgwps:wp126

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  2. 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.
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  7. repec:att:wimass:9220 is not listed on IDEAS
  8. 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.
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