The Dynamic Properties of Natural Resource Prices
No 277210, 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia from International Association of Agricultural Economists
Whether the trends in natural resource prices are stochastic or deterministic remains a contentious issue. A number of studies have employed unit root tests that determine the order of integration of the price series which in turn allows us to infer whether or not prices contain a stochastic trend. While earlier studies have delivered mixed results, the more recent studies have rejected that natural resource prices contain a stochastic trend and are therefore not persistent to shocks. However, a drawback with these studies is the assumption that the underlying model is linear, as integration is a linear concept. Since theoretical papers have argued that prices are likely to be nonlinear, the existing definitions of integrability do not apply. This paper employs a new concept, summability, which is a generalisation of integrability. A further contribution is made by updating the data. This is timely and topical given the upheavals that have occurred in natural resource prices in recent years. The conclusions show that the results are sensitive to the sample size and the underlying nonlinearity in prices. We conclude that the dynamic properties of individual natural resource prices differ and each price should be evaluated on an individual basis. Acknowledgement :
Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
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