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Are shocks to commodity prices persistent?

Paresh Narayan () and Ruipeng Liu

Applied Energy, 2011, vol. 88, issue 1, 409-416

Abstract: This paper considers the issue of whether shocks to ten commodity prices (gold, silver, platinum, copper, aluminum, iron ore, lead, nickel, tin, and zinc) are persistent or transitory. We use two recently developed unit root tests, namely the Narayan and Popp (NP) [14] test and the Liu and Narayan (LN) [26] test. Both tests allow for two structural breaks in the data series. Using the NP test, we are able to reject the unit root null for iron ore and tin. Using the GARCH-based unit root test of LN, we are able to reject the unit root null for five commodity prices (iron ore, nickel, zinc, lead, and tin). Our findings, thus, suggest that only shocks to gold, silver, platinum, aluminum, and copper are persistent.

Keywords: Commodity; prices; Unit; root; test; GARCH; Persistent; Transitory; Structural; break (search for similar items in EconPapers)
Date: 2011
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