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Unit roots in real primary commodity prices? A meta-analysis of the Grilli and Yang data set

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  • Winkelried, Diego

    (Universidad del Pacífico)

Abstract

The long-run behavior of real primary commodity prices, especially whether these series are trend stationary or contain a unit root, has been a topic of major debate in applied economics. In this paper, we perform a meta-analysis and combine the evidence of twelve representative studies on the subject, published in the last 25 years, in order to reach a unified conclusion about the presence of unit roots in these prices. The studies use different testing procedures, but share the common null hypothesis of a difference stationary process. Also, they use the individual price indices from the Grilli and Yang data set, arguably one the most popular source of long-term commodity price data. The combined evidence against unit roots in real primary commodity prices is strong: out of 24 cases, the unit root cannot be rejected in at most four. This implies that real primary commodity prices tend to be mean reverting and thus, to some degree, forecastable.

Suggested Citation

  • Winkelried, Diego, 2017. "Unit roots in real primary commodity prices? A meta-analysis of the Grilli and Yang data set," Working Papers 2017-013, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2017-013
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    Cited by:

    1. Holmes, Mark J. & Otero, Jesús, 2023. "Psychological price barriers, El Niño, La Niña: New insights for the case of coffee," Journal of Commodity Markets, Elsevier, vol. 31(C).
    2. Cunado, Juncal & Gil-Alana, Luis A. & Gupta, Rangan, 2019. "Persistence in trends and cycles of gold and silver prices: Evidence from historical data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 345-354.

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    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • 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

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