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Testing the Prebisch-Singer Hypothesis since 1650 : Evidence from Panel Techniques that Allow for Multiple Breaks

Author/Editor: Rabah Arezki | Kaddour Hadri | Prakash Loungani | Yao Rao
Authorized for Distribution: August 15, 2013
Electronic Access: Free Full Text (PDF file size is 1,816KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: In this paper, we re-examine two important aspects of the dynamics of relative primary commodity prices, namely the secular trend and the short run volatility. To do so, we employ 25 series, some of them starting as far back as 1650 and powerful panel data stationarity tests that allow for endogenous multiple structural breaks. Results show that all the series are stationary after allowing for endogeneous multiple breaks. Test results on the Prebisch-Singer hypothesis, which states that relative commodity prices follow a downward secular trend, are mixed but with a majority of series showing negative trends. We also make a first attempt at identifying the potential drivers of the structural breaks. We end by investigating the dynamics of the volatility of the 25 relative primary commodity prices also allowing for endogenous multiple breaks. We describe the often time-varying volatility in commodity prices and show that it has increased in recent years.
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Series: Working Paper No. 13/180
Subject(s): Commodity prices | Commodity price fluctuations | Economic models
    Published:   August 15, 2013        
    ISBN/ISSN:   9781484341155/1018-5941   Format:   Paper
    Stock No:   WPIEA2013180   Pages:   37
    Price:   US$18.00
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