Testing the Prebisch-Singer Hypothesis since 1650: Evidence from Panel Techniques that Allow for Multiple Breaks

Rabah Arezki, Kaddour Hadri (), Prakash Loungani and Yao Rao

No 2013/180, IMF Working Papers from International Monetary Fund

Abstract: In this paper, we re-examine two important aspects of the dynamics of relative primary commodity prices, namely the secular trend and the short run volatility. To do so, we employ 25 series, some of them starting as far back as 1650 and powerful panel data stationarity tests that allow for endogenous multiple structural breaks. Results show that all the series are stationary after allowing for endogeneous multiple breaks. Test results on the Prebisch-Singer hypothesis, which states that relative commodity prices follow a downward secular trend, are mixed but with a majority of series showing negative trends. We also make a first attempt at identifying the potential drivers of the structural breaks. We end by investigating the dynamics of the volatility of the 25 relative primary commodity prices also allowing for endogenous multiple breaks. We describe the often time-varying volatility in commodity prices and show that it has increased in recent years.

Keywords: WP; commodity price; Primary; commodities; Unit; root tests; Multiple; Structural breaks; Volatility; price volatility; tobacco price volatility; tin price volatility; banana price volatility; beef price volatility; lamb price volatility; gold price volatility; coal price volatility; nickel price volatility; commodity prices of banana; volatility of commodity price; Commodity prices; Agricultural commodities; Commodity price fluctuations; Commodity markets; Global (search for similar items in EconPapers)
Pages: 37
Date: 2013-08-15
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Testing the Prebisch–Singer hypothesis since 1650: Evidence from panel techniques that allow for multiple breaks (2014)
Working Paper: Testing the Prebisch-Singer Hypothesis Since 1650: Evidence from panel techniques that allow for multiple breaks (2013)
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