On the Use of Quadratic Trends in Natural Resource Prices' Modeling

Phoebe Koundouri () and Nikolaos Kourogenis

No 1608, DEOS Working Papers from Athens University of Economics and Business

Abstract: The use of quadratic trends for modeling natural resources' prices is a common practice. However, as shown in this paper, the specification of the trend as a second degree polynomial is the least preferable with respect to a set of model selection criteria, when compared to very simple models that involve trigonometric trend functions. All models are estimated on the price series of aluminum, copper, iron, lead, nickel, silver, tin, zinc, bituminous coal, petroleum and natural gas, providing in most cases evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications.

Keywords: Oscillatory trend; quadratic tren; Hotelling rule; natural resource prices; model selection (search for similar items in EconPapers)
JEL-codes: C22 E3 (search for similar items in EconPapers)
Date: 2016-12-30
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Persistent link: https://EconPapers.repec.org/RePEc:aue:wpaper:1608

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