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Structural breaks in Iron-Ore prices: The impact of the 1973 oil crisis

  • Angelov, Nikolay

    ()

    (Department of Economics)

This paper investigates the time-series properties of the price of iron ore. The focus is on testing a unit-root null hypothesis against a trend-stationary alternative, with a structural break allowed under both hypotheses. We consider unit-root tests with or without structural breaks, applied on historical prices of five different qualities of Swedish and Brazilian iron ore. New and more accurate critical values for the exogenous-break tests are calculated, and several of the asymptotic tests are accompanied by their bootstrap counterparts due to the limited sample sizes. Using unit-root tests allowing for an exogenous structural break in 1973, the null hypothesis of a unit root is rejected for three of the five series. The sign and nature of the estimated breaks correspond to the state of the iron and steel industry during the first half of the 1970s. The bootstrap tests give results close to those from the asymptotic ones.

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Paper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2006:11.

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Length: 41 pages
Date of creation: 20 Jan 2006
Date of revision:
Handle: RePEc:hhs:uunewp:2006_011
Contact details of provider: Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
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  15. Leon, Javier & Soto, Raimundo, 1995. "Structural breaks and long-run trends in commodity prices," Policy Research Working Paper Series 1406, The World Bank.
  16. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  17. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
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