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Commodity Prices: Cyclical Weakness or Secular Decline?

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Author Info
Reinhart, Carmen
Wickham, Peter

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Abstract

Primary commodities still account for the bulk of exports in many developing countries. However, real commodity prices have been declining almost continuously since the early 1980s. The appropriate policy response to a terms of trade shock depends importantly on whether the shock is perceived to be temporary or permanent. Our results indicate that the recent weakness in commodity prices is mostly secular, stressing the need for commodity exporting countries to concentrate on export diversification and other structural policies. There is, however, scope for stabilization funds and the use of hedging strategies, since the evidence also suggests commodity prices have become more volatile.

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File URL: http://mpra.ub.uni-muenchen.de/8173/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8173.

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Date of creation: 1994
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Publication status: Published in IMF Staff Papers 2.41(1994): pp. 175-213
Handle: RePEc:pra:mprapa:8173

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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  1. Powell, Andrew, 1991. "Commodity and Developing Country Terms of Trade: What Does the Long Run Show?," Economic Journal, Royal Economic Society, vol. 101(409), pages 1485-96, November. [Downloadable!] (restricted)
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  2. Guilkey, David K. & Schmidt, Peter, 1989. "Extended tabulations for Dickey-Fuller tests," Economics Letters, Elsevier, vol. 31(4), pages 355-357, December. [Downloadable!] (restricted)
  3. Eduardo Borensztein & Carmen Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Working Papers 94/9, International Monetary Fund.
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  4. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Atish R. Ghosh & Jonathan David Ostry, 1994. "Export Instability and the External Balance in Developing Countries," IMF Working Papers 94/8, International Monetary Fund.
  6. Harvey, A C, 1985. "Trends and Cycles in Macroeconomic Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 216-27, June.
  7. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November. [Downloadable!] (restricted)
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  8. James M. Boughton, 1991. "Commodity and Manufactures Prices in the Long Run," IMF Working Papers 91/47, International Monetary Fund.
  9. Cuddington, John T., 1992. "Long-run trends in 26 primary commodity prices : A disaggregated look at the Prebisch-Singer hypothesis," Journal of Development Economics, Elsevier, vol. 39(2), pages 207-227, October. [Downloadable!] (restricted)
  10. Grilli, Enzo R & Yang, Maw Cheng, 1988. "Primary Commodity Prices, Manufactured Goods Prices, and the Terms of Trade of Developing Countries: What the Long Run Shows," World Bank Economic Review, Oxford University Press, vol. 2(1), pages 1-47, January.
  11. Miller, Stephen M., 1988. "The Beveridge-Nelson decomposition of economic time series : Another economical computational method," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 141-142, January. [Downloadable!] (restricted)
  12. Mussa, Michael, 1986. "Nominal exchange rate regimes and the behavior of real exchange rates: Evidence and implications," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 117-214, January. [Downloadable!] (restricted)
  13. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October. [Downloadable!] (restricted)
  14. Paxson, Christina H, 1993. "Consumption and Income Seasonality in Thailand," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 39-72, February. [Downloadable!] (restricted)
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  15. Deaton, A.S., 1992. "Commodity Prices, Stabilization, and Growth in Africa," Papers 166, Princeton, Woodrow Wilson School - Development Studies.
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