Testing for trends in the terms of trade between primary commodities and manufactured goods

Primary commodity prices: Co-movements, common factors and fundamentals

“…They do find a decreasing trend in relative prices, but argue that this trend is not 4 See, among the others, Grilli and Yang (1988), Cuddington (1992), Leon and Soto (1997), Kellard and Wohar (2005), Bunzel and Vogelsang (2005), Zanias (2005), Balagtas and Holt (2009) and Harvey et al (2010). 5 In particular, Deaton (1999) underlines how industrial countries, who on average are net importers of a large range of commodities, perform very differently from less developed countries, who often export only a limited range of primary goods.…”

Assessing the dynamics of terms of trade in a model of cumulative causation and structural change

“…His results rely on the alleged fact that prices of manufactures imported by developing countries from the g5 increased considerably higher than that the prices of manufactures exported by developing countries. Other authors such as grilli and yang (1988), Bunzel and Vogelsang (2005) and Zanias (2005) have also found a negative long-run trend in the relative price of primary commodities, confirming the importance of movements in the relative prices of exports of rich and poor nations.…”

The long-run behaviour of the terms of trade between primary commodities and manufactures: a panel data approach

“…Grilli and Yang (1988) construct a US dollar commodity price index spanning from 1900 to 1986, consisting of 24 internationally traded non-fuel commodities. The Grilli and Yang (GY) dataset has become the most widely used data source in the literature related to the PS hypothesis; see, among others, Cuddington andUrzúa (1989), von Hagen (1989), Perron (1990), Powell (1991), Helg (1991), Ardeni and Wright (1992), Bleaney and Greenaway (1993), Newbold and Vougas (1996), León and Soto (1997), Kim et al (2003), Zanias (2005), Kellard and Wohar (2006) and Ghoshray (2011). However, it is worth mentioning that the work of GY is not only important because they constructed a consistent dataset over a long period of time, but also because it is perhaps the first study that tests whether commodity prices can be viewed as trend-stationary (TS) or difference-stationary (DS) processes, based on the ADF unit root test of Dickey and Fuller (1979).…”

“…4 Further extending the line of work based on unit root tests, Cuddington and Urzua (1989), Perron (1990), Helg (1991), Reinhart and Wickham (1994) and Newbold and Vougas (1996) apply the ADF test allowing for the presence of a known structural break. 5 León and Soto (1997) use the Zivot and Andrews (1992) unit root test in the presence of an endogenously determined structural break, while Zanias (2005) and Kellard and Wohar (2006) apply the Lumsdaine and Papell (1997) unit root test that allows for the presence of up to two endogenously determined structural breaks.…”

“…First, Spraos (1980), Sapsford (1985), Grilli and Yang (1988), Ardeni and Wright (1992), Bleaney and Greenaway (1993), Reinhart and Wickham (1994) and León and Soto (1997) confirm the negative sign (but not the magnitude) of the trend implicit in the works of PS. Second, Cuddington and Urzúa (1989), Perron (1990), Helg (1991), Powell (1991) and Zanias (2005) find that the relative price of primary commodities can be best characterised as a trendless process that exhibits a one-time negative shift. According to Cuddington and Urzúa (1989), this finding, strictly speaking, does not support the views of PS, because the latter refer to a secular terms of trade deterioration.…”