Commodity Prices: Cyclical Weakness or Secular Decline?

Peter Wickham and Carmen Reinhart

No 1994/007, IMF Working Papers from International Monetary Fund

Abstract: Primary commodities still account for the bulk of exports in many developing countries. However, real commodity prices have been declining almost continuously since the early 1980s and there is evidence of renewed weakness. The appropriate policy response to a terms of trade shock depends importantly on whether the shock is perceived to be temporary or permanent. Our results indicate that the recent weakness in commodity prices is mostly of a secular nature, stressing the need for commodity exporting countries to concentrate on export diversification and other structural policies. There is, however, scope for stabilization funds and the use of hedging strategies since the evidence also suggests commodity prices have become more volatile.

Keywords: WP; commodity price; commodity index; stabilization fund; support commodity agreement; price shock; commodity supply index; export commodity; commodity producer; commodity price behavior; price decline; commodity price index; commodity option; commodity risk; Commodity prices; Commodity price fluctuations; Metals; Agricultural commodities; Africa (search for similar items in EconPapers)
Pages: 58
Date: 1994-01-01
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Citations: View citations in EconPapers (161)

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Related works:
Journal Article: Commodity Prices: Cyclical Weakness or Secular Decline? (1994)
Working Paper: Commodity Prices: Cyclical Weakness or Secular Decline? (1994)
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