Non-renewable Resource Prices: Structural Breaks and Long Term Trends

Sharma, Abhijit and Balcombe, Kelvin and Fraser, Iain (2009): Non-renewable Resource Prices: Structural Breaks and Long Term Trends. Published in: Economics Bulletin , Vol. 29, No. 2 (3 May 2009): pp. 821-835.

Abstract

In this paper we examine the time series properties of nine non-renewable resources. In particular we are concerned with understanding the relationship between the number of structural breaks in the data and the nature of the resource price path, i.e. is it stationary or a random walk. To undertake our analysis we employ a number of relevant econometric methods including Bai and Perron's (1998) multiple structural break dating method. Our results indicate that these series are in many cases stationary and subject to a number of structural breaks. These results indicate that a deterministic model of resources prices may well be appropriate.

• Item Type: MPRA Paper
• Language: English
• Keywords: structural change, non-renewable resources, breaks, resource depletion
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q3 - Nonrenewable Resources and Conservation > Q31 - Demand and Supply ; Prices; C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C12 - Hypothesis Testing: General

References

[1] Ahrens, W. A. and Sharma, V. R. (1997), ‘Trends in Natural Resource Commodity Prices: Deterministic or Stochastic?’, Journal of Environmental Economics and Management 33(1): 59-74.

[2] Andrews, D. W. K. (1993), ‘Tests for parameter instability and structural change with unknown change point’, Econometrica 61, 821-856.

[3] Andrews, D. W. K. and W. Ploberger. (1994), ‘Optimal tests when a nuisance parameter is present only under the alternative’, Econometrica 62, 1383-1414.

[4] Bai, J. (1994), ‘Least Squares Estimation of a Shift in Linear Processes’, Journal of Time Series Analysis, 15, 453-472.

[5] Bai, J. (1997), ‘Estimating Multiple Breaks One at a Time’, Econometric Theory, 13, 315-352.