Commodity Prices: Cyclical Weakness or Secular Decline?

Carmen Reinhart () and Peter Wickham

MPRA Paper from University Library of Munich, Germany

Abstract: Primary commodities still account for the bulk of exports in many developing countries. However, real commodity prices have been declining almost continuously since the early 1980s. The appropriate policy response to a terms of trade shock depends importantly on whether the shock is perceived to be temporary or permanent. Our results indicate that the recent weakness in commodity prices is mostly secular, stressing the need for commodity exporting countries to concentrate on export diversification and other structural policies. There is, however, scope for stabilization funds and the use of hedging strategies, since the evidence also suggests commodity prices have become more volatile.

JEL-codes: E32 C22 E3 (search for similar items in EconPapers)
Date: Written 1994
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Published in IMF Staff Papers 2.41(1994): pp. 175-213

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Related works:
Working Paper: Commodity Prices - Cyclical Weakness or Secular Decline? (1994)
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