Sharp Breaks or Smooth Shifts? an Investigation of the Evolution of Primary Commodity Prices

Abstract

This paper explores the behavior of real commodity prices over a 50-year period. Attention is given to how the shifting means for various commodity prices have changed with a special emphasis on behavior since the mid 2000s. To identify structural changes in commodity prices, we estimate shifting-mean autoregressions by using: the Bai and Perron (1998) procedure for determining structural breaks; low frequency Fourier functions; and a procedure that specifies shifts to be smooth logistic functions of time. We find that the pattern in the timing of shifts is suggestive of the causal factors underlying the recent boom.

What Drives Commodity Prices?

“…Table 1 around here As a preliminary analysis, we implement the ADF test for relative commodity prices (see Table 2). 9 The test rejects the null of nonstationarity for only 14 out of 51…”

Revisiting purchasing power parity in Eastern European countries: quantile unit root tests

“…Equation(9)is not only an extension ofEnders and Holt (2012) but also a combination of Carrión-i-Silvestre et al (2006) andBecker et al (2006) tests.…”

Disentangling supply and demand shifts: the impacts on world salmon price

“…The fundamental driver of such index investments is the belief that rapid economic growth in China will increase demand for commodities in general. The Westernization of diets in Asian economies (Pingali 2007), along with rapid income growth, are also highlighted as important drivers (Enders and Holt 2012). Another driver is the diversion of food crops into the production of biofuels, which is generally considered to influence long-run agricultural price levels (Serra and Zilberman 2013).…”

“…Another driver is the diversion of food crops into the production of biofuels, which is generally considered to influence long-run agricultural price levels (Serra and Zilberman 2013). The recent price booms have also lead to increased interest in the Prebisch-Singer hypothesis of continuous long-term declines in primary commodity prices (Balagtas and Holt 2009;Harvey and Kellard 2010;Enders and Holt 2012). Results yield mixed evidence of the hypothesis' efficacy: Harvey and Kellard (2010) for instance, find longrun decline in the price of only 11 of 25 major commodities.…”