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How Persistent Are Shocks to World Commodity Prices?

  • Hong Liang
  • C. John McDermott
  • Paul Cashin

This paper examines the persistence of shocks to world commodity prices, using monthly IMF data on primary commodities between 1957–98. We find that shocks to commodity prices are typically long–lasting and the variability of the persistence of price shocks is quite wide. The paper also discusses the implications of these findings for national and international schemes to stabilize earnings from commodity exports and finds that if price shocks are long–lived, then the cost of stabilization schemes will likely exceed any associated smoothing benefits.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 99/80.

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Length: 54
Date of creation: 01 Jun 1999
Date of revision:
Handle: RePEc:imf:imfwpa:99/80
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  1. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
  2. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Public and International Affairs.
  3. Catherine L. Mann, 1986. "Prices, profit margins, and exchange rates," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jun, pages 366-379.
  4. Beckerman, Wilfred & Jenkinson, Tim, 1986. "What Stopped the Inflation? Unemployment of Commodity Prices?," Economic Journal, Royal Economic Society, vol. 96(381), pages 39-54, March.
  5. Rudebusch, Glenn D, 1992. "Trends and Random Walks in Macroeconomic Time Series: A Re-examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 661-80, August.
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  7. repec:imf:imfwpa:94/9 is not listed on IDEAS
  8. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
  9. Reinhart, Carmen & Wickham, Peter, 1994. "Non-oil commodity prices: Cyclical weakness or secular decline?," MPRA Paper 13871, University Library of Munich, Germany.
  10. Eduardo Borensztein & Peter Wickham & Mohsin S. Khan & Carmen Reinhart, 1994. "The Behavior of Non-Oil Commodity Prices," IMF Occasional Papers 112, International Monetary Fund.
  11. Reinhart, Carmen & Wickham, Peter, 1994. "Commodity Prices: Cyclical Weakness or Secular Decline?," MPRA Paper 8173, University Library of Munich, Germany.
  12. Peter Bardsley, 1992. "The Collapse of the Australian Wool Reserve Price Scheme," Working Papers 1992.17, School of Economics, La Trobe University.
  13. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 865-90, October.
  14. Andrews, Donald W K, 1993. "Exactly Median-Unbiased Estimation of First Order Autoregressive/Unit Root Models," Econometrica, Econometric Society, vol. 61(1), pages 139-65, January.
  15. Javier Le�N & Raimundo Soto, 1997. "Structural Breaks And Long-Run Trends In Commodity Prices," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(3), pages 347-366.
  16. Gilbert, Christopher L., 1996. "International Commodity Agreements: An obituary notice," World Development, Elsevier, vol. 24(1), pages 1-19, January.
  17. Eduardo Borensztein & Carmen M. Reinhart, 1994. "The Macroeconomic Determinants of Commodity Prices," IMF Staff Papers, Palgrave Macmillan, vol. 41(2), pages 236-261, June.
  18. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
  19. DeJong, David N, et al, 1992. "Integration versus Trend Stationarity in Time Series," Econometrica, Econometric Society, vol. 60(2), pages 423-33, March.
  20. Cuddington, John T & Urzua, Carlos M, 1989. "Trends and Cycles in the Net Barter Terms of Trade: A New Approach," Economic Journal, Royal Economic Society, vol. 99(396), pages 426-42, June.
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