## Commodity Prices: Cyclical Weakness or Secular Decline?

_IMF Working Papers, January 1, 1994_

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**Canonical URL:** [Commodity Prices: Cyclical Weakness or Secular Decline?](https://www.imf.org/en/publications/wp/issues/2016/12/30/commodity-prices-cyclical-weakness-or-secular-decline-1231)

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## Bibliographic details
- Authors: Peter Wickham, Carmen Reinhart
- Published: January 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842371.001

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### Summary findings
- Primary commodities still account for the bulk of exports in many developing countries.
- 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.
- The authors' results indicate that the recent weakness in commodity prices is mostly of a secular nature.
- Evidence also suggests commodity prices have become more volatile, creating scope for stabilization mechanisms.

### Policy implications and recommendations
- Commodity-exporting countries should concentrate on export diversification and other structural policies to address secular declines in commodity prices.
- There is scope for stabilization funds to smooth revenue and expenditure paths in the presence of more volatile commodity prices.
- Hedging strategies are a potential tool given increased commodity-price volatility.

### Evidence and interpretation
- Characterization of the recent price weakness as "mostly of a secular nature" underpins recommendations toward structural policies rather than purely short-term stabilization.
- Increased volatility supports a complementary role for financial instruments (hedging) and fiscal mechanisms (stabilization funds).

### Subject focus and keywords
- Subjects: Agricultural commodities, Commodities, Commodity price fluctuations, Commodity prices, Metals, Prices
- Keywords: Africa, Agricultural commodities, commodity index, commodity option, commodity price, commodity price behavior, Commodity price fluctuations, commodity price index, Commodity prices, commodity producer, commodity risk, commodity supply index, export commodity, Metals, price decline, price shock, stabilization fund, support commodity agreement, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/commodity-prices-cyclical-weakness-or-secular-decline-1231_