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Long-term trends in the Real real prices of primary commodities: Inflation bias and the Prebisch-Singer hypothesis

  • Cuddington, John T

Following the Boskin et al., (1996) report, it became widely recognized that price indexes in the U.S. and elsewhere overstate inflation. Svedberg and Tilton (2006) highlighted that this inflation bias may have important implications for estimated long-term trends in nonrenewable resource prices. ST construct an inflation-bias corrected CPI (and PPI) for the U.S. and use their corrected deflator(s) to define a so-called 'real real' price of copper. Their 'real real' price of copper is then used to re-estimate long-term trends in real copper prices. This paper proposes a quick method for obtaining inflation-bias-corrected estimates of long-run trends in real primary commodity prices directly from estimates in the published literature. Our approach obviates the need re-do existing empirical studies using a corrected or 'real real' price of nonrenewable resources. The two approaches are mathematically equivalent.

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Article provided by Elsevier in its journal Resources Policy.

Volume (Year): 35 (2010)
Issue (Month): 2 (June)
Pages: 72-76

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Handle: RePEc:eee:jrpoli:v:35:y:2010:i:2:p:72-76
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30467

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