Are Commodity Prices More Volatile Now? A Long-Run Perspective
Soaring commodity prices in 2007 and 2008 raised concerns that volatility was also rising, which would have implications for welfare and therefore for the design of public policy interventions. The literature focuses on trends in commodity prices r...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101027081331 http://hdl.handle.net/10986/3941 |
| Summary: | Soaring commodity prices in 2007 and
2008 raised concerns that volatility was also rising, which
would have implications for welfare and therefore for the
design of public policy interventions. The literature
focuses on trends in commodity prices rather than their
volatility characteristics. This paper contributes by
examining commodity price volatility with a newly compiled
monthly panel dataset on 45 individual commodity prices from
the end of the 18th century until today. The main
conclusions are: the timing and number of breaks in
volatility vary considerably across individual commodities,
cautioning against generalizations based on the use of
commodity price indices; the three most significant breaks
common to most commodities are the two world wars and the
collapse of the Bretton-Woods system; and structural breaks
marking increased price volatility are followed by breaks
marking declines in volatility so that there is no upward or
downward trend in volatility over time. |
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