Mean-Reversion in Unprocessed Food Prices

Kurmaş Akdoğan

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: The high volatility in food prices in the last decade is a major concern for policymakers across the globe. This study tests if there is mean-reverting behaviour in the unprocessed food prices towards a long-run trend, for twenty-four European countries, using linear and nonlinear unit root tests. The results indicate linear or non-linear mean reversion for more than one-third of the group. Non-linear models are useful in detecting asymmetric correction behaviour, depending on the size and sign of the deviation from the mean. However, out-of-sample forecasting performances of these models are poor relative to a simple autoregressive benchmark.

Keywords: Food prices; Unit root test; Nonlinearity; Forecasting (search for similar items in EconPapers)
JEL-codes: C32 C53 Q11 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1703

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