Mean-Reversion in Unprocessed Food Prices
Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey
The high volatility in food prices in the last decade is a major concern for policymakers across the globe. This study tests if there is mean-reverting behaviour in the unprocessed food prices towards a long-run trend, for twenty-four European countries, using linear and nonlinear unit root tests. The results indicate linear or non-linear mean reversion for more than one-third of the group. Non-linear models are useful in detecting asymmetric correction behaviour, depending on the size and sign of the deviation from the mean. However, out-of-sample forecasting performances of these models are poor relative to a simple autoregressive benchmark.
Keywords: Food prices; Unit root test; Nonlinearity; Forecasting (search for similar items in EconPapers)
JEL-codes: Q11 C32 C53 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1703
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