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Commodity Prices and Unit Root Tests

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  • Dabin Wang
  • William G. Tomek

Abstract

Price theory suggests that commodity prices should be stationary series. Yet, tests for unit roots rather frequently imply that these prices are not stationary. This seeming inconsistency is investigated by applying alternative specifications of unit root tests to prices of corn, soybeans, barrows and gilts, and milk. The preponderance of evidence suggests that nominal prices do not have unit roots, but the results are sensitive to the specification of the test equation. Accounting for a structural change that shifts the mean appears to be an important issue in unit root tests. Copyright 2007, Oxford University Press.

Suggested Citation

  • Dabin Wang & William G. Tomek, 2007. "Commodity Prices and Unit Root Tests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 873-889.
  • Handle: RePEc:oup:ajagec:v:89:y:2007:i:4:p:873-889
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01031.x
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    References listed on IDEAS

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    1. Robert Breunig & Indraneel Dasgupta, 2005. "Do Intra-Household Effects Generate the Food Stamp Cash-Out Puzzle?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 552-568.
    2. Wilde, Parke E., 2001. "The Food Stamp Benefit Formula: Implications For Empirical Research On Food Demand," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(01), July.
    3. repec:mpr:mprres:5114 is not listed on IDEAS
    4. Parke E. Wilde & Christine K. Ranney, 2000. "The Monthly Food Stamp Cycle: Shooping Frequency and Food Intake Decisions in an Endogenous Switching Regression Framework," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 200-213.
    5. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, March.
    6. Nord, Mark & Andrews, Margaret S. & Carlson, Steven, 2006. "Household Food Security in the United States, 2005," Economic Research Report 7243, United States Department of Agriculture, Economic Research Service.
    7. Lin, Biing-Hwan & Frazao, Elizabeth & Guthrie, Joanne F., 1999. "Away-From-Home Foods Increasingly Important to Quality of American Diet," Agricultural Information Bulletins 33733, United States Department of Agriculture, Economic Research Service.
    8. John Gibson & Bonggeun Kim, 2007. "Measurement Error in Recall Surveys and the Relationship between Household Size and Food Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(2), pages 473-489.
    9. repec:mpr:mprres:5113 is not listed on IDEAS
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