Hotelling Rules: Oscillatory Versus Quadratic Trends in Natural Resource Prices

Antonios Antypas, Phoebe Koundouri () and Nikolaos Kourogenis

No 126, GRI Working Papers from Grantham Research Institute on Climate Change and the Environment

Abstract: A model is introduced for the description of natural resources�price paths, which, in contrast to the existing literature, captures non-linear trends by means of a simple trigonometric function. This model is then compared by means of a set of model selection criteria with a quadratic trend model and with a more general one that nests both models. All models are estimated on the price series of eleven major natural resources. In most cases, the trigonometric trend model is selected as the one better �tting the data, providing evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications.

Date: 2013-08
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Working Paper: Hotelling Rules: Oscillatory Versus Quadratic Trends in Natural Resource Prices (2013)
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