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The Behavior of Non-Oil Commodity Prices

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  • Reinhart, Carmen
  • Borenzstein, Eduardo
  • Khan, Mohsin
  • Wickham, Peter

Abstract

The need to understand the factors that influence the behavior of commodity prices has taken on a special urgency in recent years, as nonoil real commodity prices have been declining almost continuously since the early 1980s. Since their short-lived recovery in 1984, real non-oil commodity prices have fallen by about 45 percent, translating into a sharp deterioration in the terms of trade for most commodity-dependent exporters. As Chart 1 illustrates, in 1992 the price of non-oil commodities relative to that of manufactures reached its lowest level in over 90 years.1 The longterm behavior of real commodity prices would thus appear to lend some support to the well-known Pre bisch-Singer hypothesis.2 This pattern in commodity prices has important practical implications for policymakers. For example, the presence of a negative trend in commodity prices implies continuously worsening terms of trade for many commodity-dependent countries, and further that efforts to stabilize the incomes of producers for an extended period of time may not be financially sustainable.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8198.

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Date of creation: 1994
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Handle: RePEc:pra:mprapa:8198

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  1. 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.
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Cited by:
  1. Dieci, Roberto & Westerhoff, Frank, 2010. "Interacting cobweb markets," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 75(3), pages 461-481, September.
  2. Hong Liang & C. John McDermott & Paul Cashin, 1999. "How Persistent Are Shocks to World Commodity Prices?," IMF Working Papers 99/80, International Monetary Fund.
  3. Daniel Cohen & Thibault Fally & Sébastien Villemot, 2007. "Commodity Funds: How To Fix Them?," OECD Development Centre Policy Briefs, OECD Publishing 32, OECD Publishing.
  4. Sapsford, David & Singer, Hans, 1998. "The IMF, the world bank and commodity prices: A case of shifting sands?," World Development, Elsevier, Elsevier, vol. 26(9), pages 1653-1660, September.
  5. C. John McDermott & Paul Cashin & Alasdair Scott, 1999. "Booms and Slumps in World Commodity Prices," IMF Working Papers 99/155, International Monetary Fund.
  6. Luis Eduardo Arango & Fernando Arias & Luz Adriana Flórez, . "Trends, Fluctuations, and Determinants of Commodity Prices," Borradores de Economia 521, Banco de la Republica de Colombia.
  7. Peretto, Pietro F. & Valente, Simone, 2011. "Resources, innovation and growth in the global economy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 58(4), pages 387-399.
  8. Westerhoff, Frank & Wieland, Cristian, 2010. "A behavioral cobweb-like commodity market model with heterogeneous speculators," Economic Modelling, Elsevier, Elsevier, vol. 27(5), pages 1136-1143, September.
  9. Cristian Wieland & Frank Westerhoff, 2004. "A behavioral cobweb model with heterogeneous speculators," Computing in Economics and Finance 2004, Society for Computational Economics 171, Society for Computational Economics.
  10. Bonilla, Eugenio Diaz, 2008. "Global macroeconomic developments and poverty:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 766, International Food Policy Research Institute (IFPRI).
  11. Luis Eduardo Arango & Ximena Chavarro & Eliana Rocío González, 2012. "Precios de bienes primarios e inflación en Colombia," Borradores de Economia 712, Banco de la Republica de Colombia.
  12. Plourde, André & Watkins, G. C., 1998. "Crude oil prices between 1985 and 1994: how volatile in relation to other commodities?," Resource and Energy Economics, Elsevier, Elsevier, vol. 20(3), pages 245-262, September.

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