Hostname: page-component-cd9895bd7-fscjk Total loading time: 0 Render date: 2024-12-28T01:27:15.399Z Has data issue: false hasContentIssue false
  • English
  • Français

DISCERNING TRENDS IN COMMODITY PRICES

Published online by Cambridge University Press:  17 July 2017

Dimitri Dimitropoulos  and
Adonis Yatchew
Dimitri Dimitropoulos
Affiliation:
University of Toronto
Adonis Yatchew*
Affiliation:
University of Toronto
*
Address correspondence to: Adonis Yatchew, Economics Department, University of Toronto, Toronto M6S 3G7, Canada; e-mail: yatchew@chass.utoronto.ca.
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper emphasizes the use of data-driven techniques to discern trends in commodity prices. Whereas many previous papers rely on parametric assumptions, we take as our departure point the view that such trends are inherently nonparametric, driven by complex forces of innovation and obsolescence, competition and strategic behavior, resource depletion and discovery, and supply and demand. Our reference specification is the partial linear model yt = f(t) + ztβ + ϵt where macroeconomic variables z enter parametrically, and f is nonparametric, to be discovered using cross-validation.

We analyze data on 11 commodities—3 hydrocarbons and 8 metals. For the majority of these commodities, our data-driven estimates of f bear close similarity to band pass estimates which include long term trends and super cycles. The OPEC effect is estimated to have increased oil prices by over 50% on average and coal prices by about 25%. U.S. coal mining legislation is estimated to have increased coal prices by 9% to 15%.

Keywords

Commodity PricesOil PricesSemiparametric ModelingTrendsSupercycles
Type
Articles
Information
Macroeconomic Dynamics , Volume 22 , Special Issue 3: Dynamics of Oil and Commodities Prices , April 2018 , pp. 683 - 701
Copyright
Copyright © Cambridge University Press 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are especially grateful to Mathieu Marcoux for assistance on multiple aspects of this project, and to Lutz Killian and Angelo Melino for helpful comments. The support of the Social Sciences and Humanities Research Council is gratefully acknowledged.

References

REFERENCES

Ahrens, W. Ashley and Sharma, Vijay R. (1997) Trends in natural resource commodity prices: Deterministic or stochastic? Journal of Environmental Economics and Management 33 (1), 59–74.Google Scholar
American Metal Market (1979) Metal Statistics, 1979: Technical Report. New York: Fairchild.Google Scholar
Aneiros-Pérez, Germán and Quintela-del-Río, Alejandro (2001) Modified cross-validation in semiparametric regression models with dependent variables. Communications in Statistics - Theory and Methods 30 (2), 289–307.CrossRefGoogle Scholar
Barnett, H. J. and Morse, C. (1963) Scarcity and Growth: The Economics of Natural Resource Availability. Baltimore: Johns Hopkins University Press.Google Scholar
Berck, Peter and Roberts, Michael (1996) Natural resource prices: Will they ever turn up? Journal of Environmental Economics and Management 31 (1), 65–78.Google Scholar
Christiano, Lawrence and Fitzgerald, Terry (2003) The band pass filter. International Economic Review 44 (2), 435–465.CrossRefGoogle Scholar
Cuddington, T. John and Jerrett, Daniel (2008) Super cycles in metals prices? IMF Staff Papers 55 (4), 541–565.Google Scholar
Dasgupta, P., Heal, G., and Stiglitz, J. (1980) The taxation of exhaustible resources. In Hughes, G. and Heal, G. (eds.), Public Policy and the Tax System, pp. 150–172. London: George Allen Unwin.Google Scholar
Denman, James and McDonald, Paul (1996) Unemployment statistics from 1881 to the present day. Labour Market Trends 104 (1), 5–18.Google Scholar
Erten, Bilge and Ocampo, José Antonio (2013) Super cycles of commodity prices since the mid-nineteenth century. World Development 44, 14–30.Google Scholar
Fan, Yanqin and Li, Qi (1996) Consistent model specification tests: Omitted variables and semiparametric functional forms. Econometrica 64 (4), 865–890.CrossRefGoogle Scholar
Gao, Jiti and Hawthorne, Kim (2006) Semiparametric estimation and testing of the trend of temperature series. Econometrics Journal 9 (2), 332–355.CrossRefGoogle Scholar
Gaudet, Gérard (2007) Natural resource economics under the rule of Hotelling. Canadian Journal of Economics 40 (4), 1033–1059.Google Scholar
Ghoshray, Atanu (2011) A reexamination of trends in primary commodity prices. Journal of Development Economics 95 (2), 242–251.Google Scholar
Gilbert, J. Richard (1978) Dominant firm pricing policy in a market for an exhaustible resource. Bell Journal of Economics 9 (2) 385–395.Google Scholar
Gilbert, J. Richard (1979) Optimal depletion of an uncertain stock. Review of Economic Studies 46 (1), 47–57.Google Scholar
Hamilton, D. James (2009) Understanding crude oil prices. The Energy Journal 30 (2), 179–206.CrossRefGoogle Scholar
Heal, Geoffrey and Barrow, Michael (1980) The relationship between interest rates and metal price movements. Review of Economic Studies 47 (1), 161–181.Google Scholar
Hotelling, Harold (1931) The economics of exhaustible resources. Journal of Political Economy 39 (2), 137–175.Google Scholar
Jacks, D. S. (2013) From Boom to Bust: A Typology of Real Commodity Prices in the Long Run. Working paper No. w18874, National Bureau of Economic Research.CrossRefGoogle Scholar
Lebergott, S. (1957) Annual estimates of unemployment in the United States, 1900–1954. In Universities-National Bureau (ed.), The Measurement and Behavior of Unemployment, pp. 211–242. Cambridge, MA: National Bureau of Economic Research.Google Scholar
Lee, Junsoo, List, John A., and Strazicich, Mark C. (2006) Non-renewable resource prices: Deterministic or stochastic trends? Journal of Environmental Economics and Management 51 (3), 354–370.CrossRefGoogle Scholar
Li, Qi (1999) Consistent model specification tests for time series econometric models. Journal of Econometrics 92 (1), 101–147.Google Scholar
Livernois, John (2009) On the empirical significance of the Hotelling rule. Review of Environmental Economics and Policy 3 (1), 22–41.Google Scholar
Livernois, R. John and Uhler, Russell S. (1987) Extraction costs and the economics of nonrenewable resources. Journal of Political Economy 95 (1), 195–203.Google Scholar
Maddison Project (2013) Statistics on World Population, GDP and Per Capita GDP 1-2010 [Data file]. Retrieved from http://www.ggdc.net/maddison/maddison-project/data.htm.Google Scholar
Manthy, R. S. (1978) Natural Resource Commodities: A Century of Statistics. Baltimore: Johns Hopkins University Press.Google Scholar
Moazzami, Bakhtiar and Anderson, F. J. (1994) Modelling natural resource scarcity using the ’error-correction’ approach. Canadian Journal of Economics 27 (4), 801–812.CrossRefGoogle Scholar
Newey, K. Whitney and West, Kenneth D. (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55 (3), 703–708.Google Scholar
Perron, Pierre (1989) The great crash, the oil price shock, and the unit root hypothesis. Econometrica 57 (6), 1361–1401.Google Scholar
Pindyck, S. Robert (1978) The optimal exploration and production of nonrenewable resources. Journal of Political Economy 86 (5), 841–861.Google Scholar
Pindyck, S. Robert (1980) Uncertainty and exhaustible resource markets. Journal of Political Economy 88 (6), 1203–1225.Google Scholar
Pindyck, S. Robert (1999) The long-run evolution of energy prices. Energy Journal 20 (2), 1–27.Google Scholar
Pindyck, S. Robert and Rotemberg, Julio J. (1990) The excess co-movement of commodity prices. The Economic Journal 100 (403), 1173–1189.Google Scholar
Potter, N. and Christy, F. T. (1962) Trends in Natural Resource Commodities: Statistics of Prices, Output, Consumption, Foreign Trade, and Employment in the United States, 1870–1957. Washington: Resources for the Future.Google Scholar
Robinson, M. Peter (1988) Root-N-Consistent semiparametric regression. Econometrica 56 (4), 931–954.CrossRefGoogle Scholar
Salant, W. Stephen. (1982) Imperfect competition in the international energy market: A computerized nash-cournot model. Operations Research 30 (2), 252–280.Google Scholar
Schurr, S. H. (1960) Historical Statistics of Minerals in the United States. Washington: Resources for the Future.Google Scholar
Slade, E. Margaret (1982) Trends in natural-resource commodity prices: An analysis of the time domain. Journal of Environmental Economics and Management 9 (2), 122–137.CrossRefGoogle Scholar
Slade, E. Margaret and Thille, Henry (2009) Whither hotelling: Tests of the theory of exhaustible resources. Annual Review of Resource Economics 1 (1), 239–260.Google Scholar
Smith, V. Kerry (1978) Measuring natural resource scarcity: Theory and practice. Journal of Environmental Economics and Management 5 (2), 150–171.CrossRefGoogle Scholar
Smith, V. Kerry (1979) Natural resource scarcity: A statistical analysis. The Review of Economics and Statistics 61 (3), 423–427.CrossRefGoogle Scholar
Smith, V. Kerry (1981) The empirical relevance of Hotelling's model for natural resources. Resources and Energy 3 (2), 105–117.Google Scholar
Solow, M. Robert and Wan, Frederic Y. (1976) Extraction costs in the theory of exhaustible resources. Bell Journal of Economics 7 (2), 359–370.Google Scholar
Stiglitz, E. Joseph (1974) Growth with exhaustible natural resources: Efficient and optimal growth paths. The Review of Economic Studies 41 (5), 123–137.Google Scholar
Sweeney, L. James (1977) Economics of depletable resources: Market forces and intertemporal bias. Review of Economic Studies 44 (1), 125–141.CrossRefGoogle Scholar
Swierzbinski, E. Joseph and Mendelsohn, Robert O. (1989) Exploration and exhaustible resources: The microfoundations of aggregate models. International Economic Review 30 (1), 175–186.CrossRefGoogle Scholar
U.K. Office for National Statistics (2014) Labor Market Statistics [Database]. Retrieved from http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/index.html.Google Scholar
U.S. Bureau of the Census (1975) Historical Statistics of the United States, Colonial Times to 1970 (No. 93). US Department of Commerce, Bureau of the Census.Google Scholar
U.S. Bureau of Labor Statistics (2014a) Producer Price Index-Commodities [Data File]. Retrieved from http://data.bls.gov/timeseries/WPU00000000.Google Scholar
U.S. Bureau of Labor Statistics (2014b) Producer Price Index-Commodities, Steel Mill Products [Data File]. Retrieved from http://data.bls.gov/timeseries/WPU1017.Google Scholar
U.S. Bureau of Labor Statistics (2014c) Unemployment Rate [Data File]. Retrieved from http://data.bls.gov/timeseries/LNS14000000.Google Scholar
U.S. Energy Information Administration (2011) Annual Energy Review 2011. Table 7.9 Coal Prices, 1949–2011 [Data File]. Retrieved from http://www.eia.gov/totalenergy/data/annual/.Google Scholar
U.S. Energy Information Administration (2013) U.S. Natural Gas Wellhead Price [Data file]. Retrieved from http://tonto.eia.gov/dnav/ng/hist/n9190us3a.htm.Google Scholar
U.S. Energy Information Administration (2014a) Annual Energy Outlook 2014. Coal Supply, Disposition, and Prices. [Data File]. Retrieved from http://www.eia.gov/oiafaeo/tablebrowser/.Google Scholar
U.S. Energy Information Administration (2014b) Henry Hub Natural Gas Spot Price [Data file]. Retrieved from http://tonto.eia.gov/dnav/ng/hist/rngwhhdm.htm.Google Scholar
U.S. Energy Information Administration (2014c) U.S. Refiner Acquisition Cost of Crude Oil [Data file]. Retrieved from http://www.eia.gov/dnav/pet/pet_pri_rac2_dcu_nus_m.htm.Google Scholar
U.S. Geological Survey (1999) Metal Prices in the United States Through 1998. US government printing office.Google Scholar
U.S. Geological Survey (2013a) Minerals Yearbook [Database]. Retrieved from http://minerals.usgs.gov/minerals/pubs/commodity/myb/.Google Scholar
U.S. Geological Survey (2013b) Historical Statistics for Mineral and Material Commodities in the United States. U.S. Geological Survey Data Series 140 [Database]. Retrieved from http://minerals.usgs.gov/minerals/pubs/historical-statistics/.Google Scholar
World Bank (2014a) World Bank Cross Country Database. World Indicators: London Metal Exchange [Database]. Retrieved from https://www.quandl.com/WORLDBANK?keyword=LME.Google Scholar
World Bank (2014b) World Development Indicators Databank. GDP Growth [Data File]. Retrieved from http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG.Google Scholar
Yatchew, A. (2003) Semiparametric Regression for the Applied Econometrician. Cambridge: Cambridge University Press.Google Scholar
Young, Denise (1992) Cost specification and firm behaviour in a hotelling model of resource extraction. Canadian Journal of Economics XXV, 41–59.Google Scholar