The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability

May 1, 2001

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Format: Chicago

Paul Cashin, and C. John McDermott The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability, (USA: International Monetary Fund, 2001) accessed December 28, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using the longest dataset publicly available (The Economist's index of industrial commodity prices), we analyze the behavior of real commodity prices over the period 1862-99, and have two main findings. First, while there has been a downward trend in real commodity prices of 1.3 percent per year over the last 140 years, little support is found for a break in the long-run trend decline in commodity prices. Second, there is evidence of a ratcheting up in the variability of price movements. The amplitude of price movements increased in the early 1900s, while the frequency of large price movements increased after the collapse of the Bretton Woods regime of fixed exchange rates in the early 1970s. While there is a downward trend in real commodity prices, this is of little practical policy relevance as it is small and completely dominated by the variability of prices.

Subject: Commodities, Commodity price fluctuations, Commodity price indexes, Commodity prices, Exchange rate arrangements, Foreign exchange, Prices

Keywords: Commodity price, Commodity price fluctuations, Commodity price indexes, Commodity prices, Commodity-price cycle, Commodity-price data, Cycles, Exchange rate arrangements, Price index, Price movement, Price variability, Price volatility, Stabilisation scheme, Trends, Variability, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/068
Stock No:

WPIEA0682001
ISBN:

9781451848991
ISSN:

1018-5941

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