The long-run behaviour of the terms of trade between primary commodities and manufactures: A panel data approach
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This paper examines the Prebisch and Singer hypothesis using a panel of twenty-four
commodity prices from 1900 to 2010. The modelling approach stems from the need to meet
two key concerns: i.) the presence of cross-sectional dependence among commodity prices;
and ii.) the identification of potential structural breaks. To address these concerns, the Hadri
and Rao (2008) test is employed. The findings suggest that all commodity prices exhibit a
structural break whose location differs across series, and that support for the Prebisch and
Singer hypothesis is mixed. Once the breaks are removed from the underlying series, the
persistence of commodity price shocks is shorter than that obtained in other studies using
alternative methodologies.