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Mean-Reversion in Unprocessed Food Prices

Author

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  • Kurmas Akdogan

Abstract

The high volatility in food prices in the last decade is a major concern for policymakers across the globe. This study tests if there is mean-reverting behaviour in the unprocessed food prices towards a long-run trend, for twenty-four European countries, using linear and nonlinear unit root tests. The results indicate linear or non-linear mean reversion for more than one-third of the group. Non-linear models are useful in detecting asymmetric correction behaviour, depending on the size and sign of the deviation from the mean. However, out-of-sample forecasting performances of these models are poor relative to a simple autoregressive benchmark.

Suggested Citation

  • Kurmas Akdogan, 2017. "Mean-Reversion in Unprocessed Food Prices," Working Papers 1703, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Handle: RePEc:tcb:wpaper:1703
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2017/17-03
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    More about this item

    Keywords

    Food prices; Unit root test; Nonlinearity; Forecasting;
    All these keywords.

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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