The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability

IMF Working Papers, May 1, 2001

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The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability

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Bibliographic details

• Authors: Paul Cashin, C. John McDermott
• Published: May 1, 2001
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451848991.001

Summary and main findings

• Using The Economist's index of industrial commodity prices (the longest dataset publicly available), the paper analyzes real commodity prices over the period 1862-99.
• Two main findings:
  • There has been a downward trend in real commodity prices of 1.3 percent per year over the last 140 years.
  • There is evidence of a ratcheting up in the variability of price movements:
  • The amplitude of price movements increased in the early 1900s.
  • The frequency of large price movements increased after the collapse of the Bretton Woods regime of fixed exchange rates in the early 1970s.
• Conclusion: While a downward trend exists, it is small and completely dominated by the variability of prices, making the trend of little practical policy relevance.

Data, period, and scope

• Dataset: The Economist's index of industrial commodity prices (described as the longest dataset publicly available).
• Sample period: 1862-99.
• Focus: Behavior of real commodity prices; amplitude and frequency of price movements across long historical periods.

Key statistics and temporal markers

• Downward trend: 1.3 percent per year.
• Historical periods noted:
  • Early 1900s: increased amplitude of price movements.
  • Early 1970s: increased frequency of large price movements following the collapse of the Bretton Woods regime.
• Time horizon referenced for the trend: "over the last 140 years."

Subject classification and keywords

• Subject areas: Commodities, Commodity price fluctuations, Commodity price indexes, Commodity prices, Exchange rate arrangements, Foreign exchange, Prices.
• Keywords include: commodity price; Commodity price fluctuations; Commodity price indexes; commodity-price cycle; commodity-price data; cycles; Exchange rate arrangements; price index; price movement; price variability; price volatility; stabilisation scheme; trends; variability; WP.

Content in this bundle

• The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability - WP/01/68
  • The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability - WP/01/68 (Markdown version)
  • The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability - WP/01/68 (PDF)