Natural resource prices: will they ever turn up?

Peter Berck and Mike Roberts

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: Hotelling's theory predicts that natural resource rents should increase over time. However, technical progress in resource extraction, environmental constraints,or great natural abundance could result in stagnant or declining product prices. Thus, there is no theoretical reason to believe that product prices will rise in the near future. The prediction of product prices by time-series methods is shown to depend critically upon whether the series are modeled as differenced or trend stationary. Dickey-Fuller and Lagrange Multiplier tests are used to show that the series are differenced stationary. Long- and short-sample series are tested. Trend-stationary modeling strongly predicts rising resource prices. The result from differenced-stationary modeling is that there is only a weak supposition that natural resource prices will rise.

Keywords: arima models; natural resources; simulation methods (search for similar items in EconPapers)
Date: 1995-03-01
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