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What can we learn from primary commodity prices series which is useful to policymakers in resource-rich countries?

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  • Kaddour Hadri

    ()
    (Queen's University Management School)

Abstract

This paper investigates the properties of real commodity prices from the per- spective of policy makers seeking to conduct a successful ?scal policy in resource- rich countries. We found that policy makers face three potential challenges: (1) secular decline of real commodity prices, the so-called Prebish-Singer (PS) hypoth- esis, (2) real commodity prices are characterised by long-cycles, (3) and relative high volatility of real commodity prices. Employing recent and powerful econo- metrics/statistical techniques, we found that real commodity prices are mean re- verting, declining over time, have long cycles and relatively high volatility and this volatility is time varying. We summarised the most successful solutions to these three challenges faced by policy makers including the countercyclical structural budget technique pioneered by Chile.

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File URL: ftp://ftp.qub.ac.uk/pub/users/repec/qub/wpaper/MS_WPS_ECO_10_7.pdf
File Function: Revised version, 2010
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Bibliographic Info

Paper provided by Queen's University Management School in its series Working Papers with number 0001.

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Length: 17 pages
Date of creation: Nov 2010
Date of revision: Nov 2010
Handle: RePEc:qub:wpaper:0001

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Related research

Keywords: resource-rich countries; Prebish-Singer Hypothesis; Cycles and Volatil- ity of Real Commodity Prices ; Panel data; Structural Change; Fiscal Policy; Structural Budget;

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  1. Lange, Glenn-Marie & Wright, Matthew, 2004. "Sustainable development in mineral economies: the example of Botswana," Environment and Development Economics, Cambridge University Press, vol. 9(04), pages 485-505, August.
  2. Kaddour Hadri & Yao Rao, 2006. "Panel Stationarity Test with Structural Breaks," Research Papers 200615, University of Liverpool Management School.
  3. Kirk Hamilton & John Hartwick, 2005. "Investing exhaustible resource rents and the path of consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 38(2), pages 615-621, May.
  4. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
  5. David I. Harvey, & Stephen J. Leybourne, & A. M. Robert Taylor, 2006. "A simple, robust and powerful test of the trend hypothesis," Discussion Papers 06/01, University of Nottingham, Granger Centre for Time Series Econometrics.
  6. David I. Harvey & Stephen J. Leybourne & A.M. Robert Taylor, . "Simple, Robust and Powerful Tests of the Breaking Trend Hypothesis," Discussion Papers 06/11, University of Nottingham, School of Economics.
  7. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
  8. Tae-Hwan Kim & Stephan Pfaffenzeller & Tony Rayner & Paul Newbold, 2003. "Testing for Linear Trend with Application to Relative Primary Commodity Prices," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(5), pages 539-551, 09.
  9. John Hartwick, 1976. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," Working Papers 220, Queen's University, Department of Economics.
  10. Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
  11. 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.
  12. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  13. Kellard, Neil & Wohar, Mark E., 2006. "On the prevalence of trends in primary commodity prices," Journal of Development Economics, Elsevier, vol. 79(1), pages 146-167, February.
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Cited by:
  1. Ana Iregui & Jes├║s Otero, 2013. "The long-run behaviour of the terms of trade between primary commodities and manufactures: a panel data approach," Portuguese Economic Journal, Springer, vol. 12(1), pages 35-56, April.

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