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The Relative Volatility of Commodity Prices: A re-appraisal

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  • 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, although most of the existing evidence does not actually attempt to measure the volatility of prices of individual goods or commodities. 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 are less volatile than those of individual manufactured goods. However, the challenges of managing terms of trade volatility in developing countries with concentrated export baskets remain.

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Bibliographic Info

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 070.

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Date of creation: 2012
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Handle: RePEc:oxf:oxcrwp:070

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Keywords: International Commodity Prices; Volatility; Manufactured Product Prices;

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References

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  1. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  2. Frederick van der Ploeg, 2011. "Natural Resources: Curse or Blessing?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 366-420, June.
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  5. Angus Deaton & Guy Laroque, 2002. "A model of commodity prices after Sir Arthur Lewis," Working Papers 201, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  6. Rabah Arezki & Markus Bruckner, 2011. "Food Prices and Political Instability," IMF Working Papers 11/62, International Monetary Fund.
  7. Daniel Lederman & William F. Maloney, 2007. "Natural Resources : Neither Curse nor Destiny," World Bank Publications, The World Bank, number 7183.
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  10. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
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  13. 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.
  14. 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.
  15. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
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Cited by:
  1. Jamal Bouoiyour & Refk Selmi, 2014. "Commodity price uncertainty and manufactured exports in Morocco and Tunisia: Some insights from a novel GARCH model," Economics Bulletin, AccessEcon, vol. 34(1), pages 220-233.
  2. Bouoiyour, Jamal & Selmi, Refk, 2013. "Exchange Volatility and Export Performance in Egypt: New Insights from Wavelet Decomposition and Optimal GARCH Model," MPRA Paper 49140, University Library of Munich, Germany, revised Jan 2013.
  3. Bouoiyour, Jamal & Selmi, Refk, 2013. "Commodity Price Uncertainty and Manufactured Exports in Morocco and Tunisia: Some Insights from a Novel GARCH Model," MPRA Paper 53412, University Library of Munich, Germany, revised Nov 2013.
  4. Bouoiyour, Jamal & Selmi, Refk, 2013. "Exchange rate uncertainty and export performance: what meta-analysis reveals?," MPRA Paper 49249, University Library of Munich, Germany, revised Aug 2013.

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