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

By Rabah Arezki, Kaddour Hadri, Prakash Loungani, Yao Rao

August 15, 2013

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Rabah Arezki, Kaddour Hadri, Prakash Loungani, and Yao Rao. Testing the Prebisch-Singer Hypothesis since 1650: Evidence from Panel Techniques that Allow for Multiple Breaks, (USA: International Monetary Fund, 2013) accessed November 21, 2024

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.

Subject: Agricultural commodities, Commodities, Commodity markets, Commodity price fluctuations, Commodity prices, Financial markets, Prices

Keywords: Agricultural commodities, Banana price volatility, Beef price volatility, Coal price volatility, Commodities, Commodity markets, Commodity price, Commodity price fluctuations, Commodity prices, Commodity prices of banana, Global, Gold price volatility, Lamb price volatility, Multiple, Nickel price volatility, Price volatility, Primary, Root tests, Structural breaks, Tin price volatility, Tobacco price volatility, Unit, Volatility, Volatility of commodity price, WP

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/180
Stock No:

WPIEA2013180
ISBN:

9781484341155
ISSN:

1018-5941

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