Commodity Price Booms and Breaks: Detection, Magnitude and Implications for Developing Countries

45 Pages Posted: 25 Jan 2014

See all articles by Rodrigo Mariscal

Rodrigo Mariscal

El Colegio de Mexico; Mexico's Ministry of Finance

Andrew Powell

Universidad Torcuato Di Tella - School of Business; Inter-American Development Bank (IDB); Harvard University - Center for International Development (CID)

Date Written: January 2014

Abstract

There has been much interest of late regarding the current commodity “super cycle”. However, even sizing the current boom implies knowledge of long-run trends that are notoriously difficult to estimate. This paper uses new techniques to identify breaks in commodity prices and estimate trends and cointegrating relationships and argues that the weight of evidence is against a stable declining commodity terms of trade. The results are used to characterize the current boom and, assuming no new break, how commodity prices would be expected to return to the estimated “equilibrium”. The paper also discusses implications for commodity-dependent developing countries.

JEL Classification: C32, C52, Q02, Q33

Suggested Citation

Mariscal, Rodrigo and Powell, Andrew P., Commodity Price Booms and Breaks: Detection, Magnitude and Implications for Developing Countries (January 2014). IDB Working Paper No. IDB-WP-444. Available at SSRN: https://ssrn.com/abstract=2384422 or http://dx.doi.org/10.2139/ssrn.2384422

Rodrigo Mariscal

El Colegio de Mexico ( email )

Camino al Ajusco 20
Col. Pedregal de Santa Teresa
Mexico, City, 10740
Mexico

HOME PAGE: http://www.colmex.mx/

Mexico's Ministry of Finance ( email )

Av. Insurgentes Sur No. 1971
Torre III, Piso 9
Mexico City, CDMX 01020
Mexico

Andrew P. Powell

Universidad Torcuato Di Tella - School of Business ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina
+5411 4787-9349 (Phone)
+5411 4783-3220 (Fax)

Inter-American Development Bank (IDB) ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

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