Commodity Prices : Cyclical Weakness or Secular Decline?

Author/Editor:

Peter Wickham ; Carmen Reinhart

Publication Date:

January 1, 1994

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:

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 and there is evidence of renewed weakness. 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 of a secular nature, 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.

Series:

Working Paper No. 94/7

Notes:

Also published in Staff Papers, Vol. 41, No. 2, June 1994.

English

Publication Date:

January 1, 1994

ISBN/ISSN:

9781451842371/1018-5941

Stock No:

WPIEA0071994

Format:

Paper

Pages:

58

Please address any questions about this title to publications@imf.org