Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 91, Issue 1, Pages 87-105Publisher
WILEY
DOI: 10.1111/j.1467-8276.2008.01179.x
Keywords
nonlinear model; primary commodities; smooth transition autoregression; time-varying autoregression; unit root tests
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Funding
- Agricultural Experiment Station at Purdue University
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This article extends the recent literature on the Prebisch-Singer hypothesis of a long-run decline in the relative prices of primary commodities. Our main innovation is testing for and estimating nonlinear alternatives to a secular deterioration. Specifically, we use bootstrap procedures to test the linear unit root model against models belonging to the family of smooth transition autoregressions (STARs) for twenty-four commodities, 1900-2003. In nineteen cases we reject the linear null at usual significance levels. In sixteen cases we are able to successfully fit STAR-type models. Simulation results show there is little support for the Prebisch-Singer hypothesis.
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