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UNU-WIDER The Long-Run Behaviour of the Terms of Trade between Primary Commodities and Manufactures

Support functions

A teenager wears torn rubber boots in a muddy local market in Bac Ha, Viet Nam. As of 2005 figures, half the world population—more than 3 billion people–is estimated to live on less than USD 2.50 a day. Bac Ha, Viet Nam. UN Photo/Kibae Park.

Table of contents

WP/71 The Long-Run Behaviour of the Terms of Trade between Primary Commodities and Manufactures

This study examines the Prebisch and Singer hypothesis using a panel of 24 commodity prices from 1900 to 2010. The modelling approach stems from the need to meet two key concerns: (1) the presence of cross-sectional dependence among commodity prices; and (2) the identification of potential structural breaks. To address these concerns, the Hadri and Rao test (2008) is employed. The findings suggest that all commodity prices exhibit a structural break at different locations across series, and that support for the Prebisch and Singer hypothesis is mixed. Once the breaks are removed from the underlying series, the persistence of commodity price shocks is shorter than that obtained in other studies using alternative methodologies.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2011/71
Title:
WP/71 The Long-Run Behaviour of the Terms of Trade between Primary Commodities and Manufactures
Authors:
Jesús Otero and Ana María Iregui
Publication date:
November 2011
ISBN 13 Print:
978-92-9230-438-6
Copyright holder:
© UNU-WIDER
Copyright year:
2011
Keywords:
Prebisch and Singer hypothesis, panel stationarity
JEL:
O13, C33
Project:
New Directions in Development Economics
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development).
Format:
online

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