When Grilli and Yang meet Prebisch and Singer: Piecewise linear trends in primary commodity prices

Hiroshi Yamada and Gawon Yoon

Journal of International Money and Finance, 2014, vol. 42, issue C, 193-207

Abstract: In this study, we test the Prebisch–Singer hypothesis on the secular decline of relative primary commodity prices with the extended Grilli and Yang (1988) data set, ending at 2010.” Rather than asking whether it holds for the whole sample period, we examine if the hypothesis holds sometimes during the sample period by estimating the piecewise linear trends of primary commodity prices. We employ the new ℓ1 trend filtering proposed by Kim et al. (2009) to estimate the piecewise linear trends. We find that the Prebisch–Singer hypothesis holds sometimes, but not always, for many of the primary commodities in the Grilli–Yang data. The strength of the Prebisch–Singer hypothesis has become substantially weaker recently, as the relative prices of many primary commodities have increased sharply since around 2000.

Keywords: Prebisch–Singer hypothesis; Primary commodity prices; ℓ1 Trend filtering; Piecewise linear trends (search for similar items in EconPapers)
JEL-codes: C22 F1 O13 Q11 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:42:y:2014:i:c:p:193-207

DOI: 10.1016/j.jimonfin.2013.08.011

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