TY - JOUR
T1 - Discerning trends in international metal prices in the presence of nonstationary volatility
AU - Addison, Anthony John
AU - Ghoshray, Atanu
PY - 2023/2
Y1 - 2023/2
N2 - In this paper, we develop an empirical framework that allows us to trace out a time path of metal prices. This framework shows that unpredictable shifts in demand, extraction costs and discovery of reserves, make estimation of the slope of this underlying trend an empirical question. Further, the low elasticity of demand and supply cause large volatility in the prices, which makes estimation of the trend difficult. We estimate the trend in metal prices employing econometric procedures that are robust to the underlying order of integration of the data and allow for nonstationary volatility, which we note is a characteristic feature of metal prices. We further analyse whether metal prices are characterised by stochastic trends by conducting unit root tests that allow for nonstationary volatility. Applying these procedures on metal prices for over a century, we draw conclusions that relate to policy.
AB - In this paper, we develop an empirical framework that allows us to trace out a time path of metal prices. This framework shows that unpredictable shifts in demand, extraction costs and discovery of reserves, make estimation of the slope of this underlying trend an empirical question. Further, the low elasticity of demand and supply cause large volatility in the prices, which makes estimation of the trend difficult. We estimate the trend in metal prices employing econometric procedures that are robust to the underlying order of integration of the data and allow for nonstationary volatility, which we note is a characteristic feature of metal prices. We further analyse whether metal prices are characterised by stochastic trends by conducting unit root tests that allow for nonstationary volatility. Applying these procedures on metal prices for over a century, we draw conclusions that relate to policy.
KW - Faculty of Social Sciences
KW - Metal prices
KW - Persistence
KW - Volatility
KW - Trends
U2 - 10.1016/j.reseneeco.2022.101334
DO - 10.1016/j.reseneeco.2022.101334
M3 - Journal article
JO - Resource and Energy Economics
JF - Resource and Energy Economics
SN - 0928-7655
M1 - 101334
ER -