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On the Use of Quadratic Trends in Natural Resource Prices' Modeling

Author

Listed:
  • Phoebe Koundouri
  • Nikolaos Kourogenis

    (Department of Banking and Financial Management, University of Piraeus.)

Abstract

The use of quadratic trends for modeling natural resources' prices is a common practice. However, as shown in this paper, the specification of the trend as a second degree polynomial is the least preferable with respect to a set of model selection criteria, when compared to very simple models that involve trigonometric trend functions. All models are estimated on the price series of aluminum, copper, iron, lead, nickel, silver, tin, zinc, bituminous coal, petroleum and natural gas, providing in most cases evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications.

Suggested Citation

  • Phoebe Koundouri & Nikolaos Kourogenis, 2016. "On the Use of Quadratic Trends in Natural Resource Prices' Modeling," DEOS Working Papers 1608, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1608
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Oscillatory trend; quadratic tren; Hotelling rule; natural resource prices; model selection;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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