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When Grilli and Yang meet Prebisch and Singer: Piecewise linear trends in primary commodity prices

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  • Yamada, Hiroshi
  • Yoon, Gawon

Abstract

In this study, we test the Prebisch–Singer hypothesis on the secular decline of relative primary commodity prices with the extended Grilli and Yang (1988) data set, ending at 2010.” Rather than asking whether it holds for the whole sample period, we examine if the hypothesis holds sometimes during the sample period by estimating the piecewise linear trends of primary commodity prices. We employ the new ℓ1 trend filtering proposed by Kim et al. (2009) to estimate the piecewise linear trends. We find that the Prebisch–Singer hypothesis holds sometimes, but not always, for many of the primary commodities in the Grilli–Yang data. The strength of the Prebisch–Singer hypothesis has become substantially weaker recently, as the relative prices of many primary commodities have increased sharply since around 2000.

Suggested Citation

  • Yamada, Hiroshi & Yoon, Gawon, 2014. "When Grilli and Yang meet Prebisch and Singer: Piecewise linear trends in primary commodity prices," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 193-207.
  • Handle: RePEc:eee:jimfin:v:42:y:2014:i:c:p:193-207
    DOI: 10.1016/j.jimonfin.2013.08.011
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    References listed on IDEAS

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    Cited by:

    1. Yoon, Gawon, 2015. "Locating change-points in Hodrick–Prescott trends with an application to US real GDP: A generalized unobserved components model approach," Economic Modelling, Elsevier, vol. 45(C), pages 136-141.
    2. Winkelried, Diego, 2016. "Piecewise linear trends and cycles in primary commodity prices," Journal of International Money and Finance, Elsevier, vol. 64(C), pages 196-213.
    3. Yamada Hiroshi & Yoon Gawon, 2016. "Selecting the tuning parameter of the ℓ1 trend filter," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 20(1), pages 97-105, February.
    4. Yves Jégourel, 2017. "Tendances et cyclicité du prix des matières premières (partie 1) : le débat sur l’hypothèse de Prebisch-Singer," Policy notes & Policy briefs 1729, OCP Policy Center.

    More about this item

    Keywords

    Prebisch–Singer hypothesis; Primary commodity prices; ℓ1 Trend filtering; Piecewise linear trends;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • F1 - International Economics - - Trade

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