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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

Abstract

This paper investigates the properties of real commodity prices from the perspective of policy makers seeking to conduct a successful fiscal 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) hypothesis, (2) real commodity prices are characterised by long-cycles, (3) and relative high volatility of real commodity prices. Employing recent and powerful econometrics/statistical techniques, we found that real commodity prices are mean reverting, 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.

Suggested Citation

  • Kaddour Hadri, 2010. "What Can We Learn From Primary Commodity Prices Series Which Is Useful To Policymakers In Resource-Rich Countries?," Economics Working Papers 10-07, Queen's Management School, Queen's University Belfast.
    • Handle: RePEc:qub:wpaper:1007
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    References listed on IDEAS

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    Cited by:

    1. Ana Iregui & Jesús Otero, 2013. "The long-run behaviour of the terms of trade between primary commodities and manufactures: a panel data approach," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 12(1), pages 35-56, April.

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    More about this item

    Keywords

    Resource-rich countries; Prebish-Singer Hypothesis; Cycles and Volatility of Real Commodity Prices; Panel data; Structural Change; Fiscal Policy; Structural Budget;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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