Reinhart, Carmen and Wickham, Peter (1994): Commodity Prices: Cyclical Weakness or Secular Decline? Published in: IMF Staff Papers , Vol. 41, No. 2 (June 1994): pp. 175-213.
Download (2326Kb) | Preview
Primary commodities still account for the bulk of exports in many developing countries. However, real commodity prices have been declining almost continuously since the early 1980s. The appropriate policy response to a terms of trade shock depends importantly on whether the shock is perceived to be temporary or permanent. Our results indicate that the recent weakness in commodity prices is mostly secular, stressing the need for commodity exporting countries to concentrate on export diversification and other structural policies. There is, however, scope for stabilization funds and the use of hedging strategies, since the evidence also suggests commodity prices have become more volatile.
|Item Type:||MPRA Paper|
|Original Title:||Commodity Prices: Cyclical Weakness or Secular Decline?|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles
|Depositing User:||Carmen Reinhart|
|Date Deposited:||09. Apr 2008 04:47|
|Last Modified:||12. Feb 2013 16:59|
Adams. Charles. Paul R. Fenton. and Remming Larsen. "Potential Output in Major Industrial Countries." in Staff Studies for the World Economic Outlook. World Economic and Financial Surveys (Washington: International Monetary Fund. August 1987), pp. 1-38. Ardeni, Pier Giorgio, and Brian Wright. "The Pre bisch-Singer Hypothesis: A Reappraisal Independent of Stationarity Hypothesis," Economic Journal. Vol. 102 (July 1992), pp. 803-812. Bevan. D.L., P. Collier. and J.W. Gunning, "Consequences of a Commodity Boom in a Controlled Economv: Accumulation and Redistribution in Kenya. 1975-83," World Bank E~onomic Review. Vol. 1 (May 1987), pp. 489-513. Beveridge. S.. and C. Nelson ... A New Approach to Decomposition of Economic lime Series into Permanent and Transitory Components with Particular Attention to the Measurement of the Business Cycle." Journal of Monetary Economics. Vol. 7 (1981). pp. 151-74. Borensztein. Eduardo. and Carmen M. Reinhart. "The Macroeconomic Determinants of Commodity Prices." Staff Papers. International Monetary Fund. Vol. 41 (June 1994). pp. 236-61. Boughton. James M.. "Commodity and Manufactures Prices in the Long Run." IMF Working Paper 91/47 (Washington: International Monetary Fund. May 1991). Campbell. J .. and P. Perron. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots." NBER Macroeconomics Annual 1991. ed. by Jean Olivier Blanchard and Stanley Fischer (Cambridge: MIT Press. 1991). Chu. Ke-Young, and Thomas K. Morrison. "World Non-Oil Primary Commodity Markets: A Medium-Term Framework of Analysis." Staff Papers, International Monetary Fund. Vol. 33 (March 1986). pp. 139-84. Claessens. Stijn. and Ronald C. Duncan. Managing Commodity Price Risk in Developing Countries (Baltimore: London: John Hopkins University Press. 1994). Cochrane. John H .. "How Big Is the Random Walk in GNP?" Journal of Political Economy, Vol. 96 (October 1988). pp. 893-920. Cuddington. John T.. "Long-run Trends in 26 Primary Commodity Prices: A Disaggregated Look at the Prebisch-Singer Hypothesis." Journal of Development Economics. Vol. 39 (October 1992), pp. 207-227. ---, and Carlos M. Urzua, "Trends and Cvcles in the Net Barter Terms of Trade: A New Approach." Economic Journal, Vol. 99 (June 1989), pp. 426-42. Deaton, Angus S.. "Commodity Prices. Stabilization, and Growth in Africa." Research Program in Development Studies. Discussion Paper 166, Princeton University (1992). ---, and Guy Laroque. "On the Behaviour of Commodity Prices," Review of Economic Studies, Vol. 59 (January 1992), pp. 1-23. Dobozi. Istvan. "The Centrally Planned Economies: Extravagant Consumers." in World Metal Demand-Trends and Prospeccs. ed. by John E. Tilton (Washington: Resources for the Future. 1990), pp. 113-60. Ghosh. Atish. and Jonathan Ostry, "Export Instability and the External Balance in Developing Countries." Staff Papers. International Monetary Fund. Vol. 41 (June 1994), pp. 214-35. Goldin. Ian. and Odin Knudsen. Agricultural Trade Liberalization: Implications for Developing Countries (Paris: OECD, 1990). Grilli. Enzo R.. and Maw Chang Yang, "Primary Commodity Prices. Manufactured Goods Prices. and the Terms of Trade of Developing Countries: What the Long Run Shows." World Bank Economic Review, Vol. 2 (January 1988), pp. 1-47. Guilkey, D.. and P. Schmidt. "Extended Tabulations for Dickey-Fuller Tests." Economic Letters. Vol. 31 (1989), pp. 355-57. Harrison. P.l., and M. Akram. "Generalized Exponentially Weighted Regression and Parsimonious Dynamic Linear Modeling," in Time Series Analysis: Theory and Practice 3. ed. by O.D. Anderson (Amsterdam: New York: North-Holland. 1983), pp. 19-42. Harvey, A.C., "Trends and Cycles in Macroeconomic Time Series," Journal of Bwiness & Economic Statistics. Vol. 3 (July 1985), pp. 216-27. Miller. S., "The Beveridge-Nelson Decomposition of Economic Time Series: Another Economical Computational Method," Journal of Monetary Economics, Vol. 21 (1988), pp. 141-42. Mussa, Michael. "Nominal Exchange Rate Regimes and the Behavior of Real Exchange Rates: Evidence and Implications." Carnegie Rochester Conference Series on Public Policy, Vol. 25 (Autumn 1986), pp. 117-214. Ostry, Jonathan D .. and Carmen M. Reinhart, "Private Saving and Terms of Trade Shocks: Evidence from Developing Countries." Staff Papers. International Monetary Fund. Vol. 39 (September 1992), pp. 495-517. Paxson. Christian H.. "Consumption and Income Seasonality in Thailand." Journal of Political Economy, Vol. 101 (February 1993). pp. 39-72. Perron. Pierre. "The Great Crash. the Oil Price Shock. and the Unit Root Hypothesis."' Econometrica. Vol. 57 (November 1989), pp. 1361-401. Powell. Andrew. "Commodity and Developing Country Terms of Trade: What Does the Long Run Show? ," Economic Journal. Vol. 101 (November 1991), pp. 1485-96. Tilton. John E., "The aECD Countries: Demand Trend Setters." in World Metal Demand-Trends and Prospeccs. ed. by John E. Tilton (Washington: Resources for the Future. 1990), pp. 35-76. World Bank. The East Asian Miracle: Economic Growth and Public Policy (New York: Oxford University Press, 1993). avot, Eric. and Donald W.K. Andrews. "Further Evidence on the Great Crash. the Oil-Price Shock. and the Unit-Root Hypothesis."' Journal of Bwiness and Economic Statistics. Vol. 10 (July 1992), pp. 251-70.