Trends and Persistence in Primary Commodity Prices

This paper applies new time-series procedures to examine the Prebisch-Singer hypothesis of a secular deterioration in relative primary commodity prices and the nature of their persistence. Employing a dataset of 24 relative commodity prices for the 1900-98 period, the pervasiveness of the Prebisch-Singer hypothesis is shown to be a function of a priori selected decision criteria, providing an explanation of conflicting findings in the recent literature. Moreover, much less persistence is found in the relative commodity prices than previously reported, since 23 out of the 24 commodities can be classified as trend-stationary. This implies there may well be more room for stabilization and price support mechanisms than previously advocated.