A reexamination of trends in primary commodity prices

Atanu Ghoshray

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35 Citations (Scopus)

Abstract

This paper conducts a reexamination of the Prebisch–Singer hypothesis by employing the unit root test proposed by Lee and Strazicich (2003) and Lee and Strazicich (2004) that allow for up to two structural breaks. Given the higher power of these tests compared to the Zivot and Andrews (1992) and Lumsdaine and Papell (1997) tests, rejection of the null can be considered as genuine evidence of stationarity. The main findings of this paper are that eleven out of twenty-four commodity prices are found to be difference stationary implying that shocks to these commodities tend to be permanent in nature. The remaining thirteen prices are found to exhibit trend stationary behavior with either one or two structural breaks. Most of the commodities that do not exhibit difference stationary behavior seem to contain no significant trends. There are fewer cases, in relation to past studies, of commodities that display negative trends thereby weakening the case for the Prebisch–Singer hypothesis.
Original languageEnglish
Pages (from-to)242-251
Number of pages10
JournalJournal of Development Economics
Volume95
Issue number2
DOIs
Publication statusPublished - Jul 2011

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Keywords

  • unit roots
  • primary commodity prices
  • structural change
  • prebisch-Singer hypothesis

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