Trends and Cycles in the Net Barter Terms of Trade: A New Approach

John Cuddington and Carlos Urzúa

Economic Journal, 1989, vol. 99, issue 396, 426-42

Abstract: This study has two objectives. First, it uses time-series techniques (including unit root tests) to reexamine the classic Prebisch-Singer hypothesis that the relative prices of primary commodities, in terms of manufactured goods, are characterized by secular deterioration. Second, commodity price movements are decomposed into permanent and cyclical components using the Beveridge and Nelson (1981) technique. The latter information is valuable when assessing the viability of commodity stabilization funds and formulating countercyclical macroeconomic policy responses to commodity booms and busts. Copyright 1989 by Royal Economic Society.

Date: 1989
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