IDEAS home Printed from https://ideas.repec.org/p/mns/wpaper/wp201302.html
   My bibliography  Save this paper

Variable Long-Term Trends in Mineral Prices: The Ongoing Tug-of-War between Exploration, Depletion, and Technological Change

Author

Listed:
  • John T. Cuddington

    (Division of Economics and Business, Colorado School of Mines)

  • Grant Nülle

    (Division of Economics and Business, Colorado School of Mines)

Abstract

This paper explores the use of low-frequency band-pass filters for describing long-run trends in real mineral commodity prices. This approach has the advantage of allowing long-run trends rate to evolve gradually over time, rather than assuming that they are constant (perhaps with occasional structural breaks) over time. This is a flexible way of capturing the ongoing `tug of war' between exploration, depletion, and technological change. Over 100 mineral and commodities, stretching back to the late 19th or early 20th century, are considered. The variety of LR trends is astonishing, but very few increase monotonically, contrary to the prediction of the basic Hotelling model. Some decline monotonically (as predicted by Prebisch and Singer); some have the U-shaped pattern predicted by Pindyck (1978), Heal (1981) and Slade (1982). Others have changed direction up to three times in the period since 1900. The tug of war continues with exhaustion nowhere in sight.

Suggested Citation

  • John T. Cuddington & Grant Nülle, 2013. "Variable Long-Term Trends in Mineral Prices: The Ongoing Tug-of-War between Exploration, Depletion, and Technological Change," Working Papers 2013-02, Colorado School of Mines, Division of Economics and Business.
    • Handle: RePEc:mns:wpaper:wp201302
    as

    Download full text from publisher

    File URL: http://econbus-papers.mines.edu/working-papers/wp201302.pdf
    File Function: First version, 2013
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Cashin & C. John McCDermott, 2002. "The Long-Run Behavior of Commodity Prices: Small Trends and Big Variability," IMF Staff Papers, Palgrave Macmillan, vol. 49(2), pages 1-2.
    2. Berck, Peter & Roberts, Michael, 1996. "Natural Resource Prices: Will They Ever Turn Up?," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 65-78, July.
    3. Christian J. Murray, 2003. "Cyclical Properties of Baxter-King Filtered Time Series," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 472-476, May.
    4. Tae‐Hwan Kim & Stephan Pfaffenzeller & Tony Rayner & Paul Newbold, 2003. "Testing for Linear Trend with Application to Relative Primary Commodity Prices," Journal of Time Series Analysis, Wiley Blackwell, vol. 24(5), pages 539-551, September.
    5. Diego Comin & Mark Gertler, 2006. "Medium-Term Business Cycles," American Economic Review, American Economic Association, vol. 96(3), pages 523-551, June.
    6. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    7. David I. Harvey & Neil M. Kellard & Jakob B. Madsen & Mark E. Wohar, 2010. "The Prebisch-Singer Hypothesis: Four Centuries of Evidence," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 367-377, May.
    8. Powell, Andrew, 1991. "Commodity and Developing Country Terms of Trade: What Does the Long Run Show?," Economic Journal, Royal Economic Society, vol. 101(409), pages 1485-1496, November.
    9. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, May.
    10. Cuddington, John T & Urzua, Carlos M, 1989. "Trends and Cycles in the Net Barter Terms of Trade: A New Approach," Economic Journal, Royal Economic Society, vol. 99(396), pages 426-442, June.
    11. Osborn, Denise R, 1995. "Moving Average Detrending and the Analysis of Business Cycles," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 547-558, November.
    12. Robert S. Pindyck, 1999. "The Long-Run Evolutions of Energy Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-27.
    13. Marianne Baxter & Robert G. King, 1999. "Measuring Business Cycles: Approximate Band-Pass Filters For Economic Time Series," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 575-593, November.
    14. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    15. repec:bla:scandj:v:83:y:1981:i:2:p:334-51 is not listed on IDEAS
    16. Smith, V Kerry, 1979. "Natural Resource Scarcity: A Statistical Analysis," The Review of Economics and Statistics, MIT Press, vol. 61(3), pages 423-427, August.
    17. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, September.
    18. John T Cuddington & Daniel Jerrett, 2008. "Super Cycles in Real Metals Prices?," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 541-565, December.
    19. Brown, Gardner M, Jr & Field, Barry C, 1978. "Implications of Alternative Measures of Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 229-243, April.
    20. Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June.
    21. Luca Benati, 2001. "Band-pass filtering, cointegration, and business cycle analysis," Bank of England working papers 142, Bank of England.
    22. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-661, September.
    23. David Levhari & Robert S. Pindyck, 1981. "The Pricing of Durable Exhaustible Resources," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 96(3), pages 365-377.
    24. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
    25. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
    26. Heal, Geoffrey & Barrow, Michael, 1981. "Empirical investigation of the long-term movement of resource prices : A preliminary report," Economics Letters, Elsevier, vol. 7(1), pages 95-103.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Courage Mlambo, 2022. "Non-Renewable Resources and Sustainable Resource Extraction: An Empirical Test of the Hotelling Rule’s Significance to Gold Extraction in South Africa," Sustainability, MDPI, vol. 14(17), pages 1-17, August.
    2. József Popp & Judit Oláh & Mária Farkas Fekete & Zoltán Lakner & Domicián Máté, 2018. "The Relationship Between Prices of Various Metals, Oil and Scarcity," Energies, MDPI, vol. 11(9), pages 1-19, September.
    3. Vásquez Cordano, Arturo L. & Zellou, Abdel M., 2020. "Super cycles in natural gas prices and their impact on Latin American energy and environmental policies," Resources Policy, Elsevier, vol. 65(C).
    4. Tapia Cortez, Carlos A. & Hitch, Michael & Sammut, Claude & Coulton, Jeff & Shishko, Robert & Saydam, Serkan, 2018. "Determining the embedding parameters governing long-term dynamics of copper prices," Chaos, Solitons & Fractals, Elsevier, vol. 111(C), pages 186-197.
    5. Schischke, A. & Papenfuß, P. & Brem, M. & Kurz, P. & Rathgeber, A.W., 2023. "Sustainable energy transition and its demand for scarce resources: Insights into the German Energiewende through a new risk assessment framework," Renewable and Sustainable Energy Reviews, Elsevier, vol. 176(C).
    6. Rossen, Anja, 2015. "What are metal prices like? Co-movement, price cycles and long-run trends," Resources Policy, Elsevier, vol. 45(C), pages 255-276.
    7. Tapia, Carlos & Coulton, Jeff & Saydam, Serkan, 2020. "Using entropy to assess dynamic behaviour of long-term copper price," Resources Policy, Elsevier, vol. 66(C).
    8. Addison, Tony & Ghoshray, Atanu, 2023. "Discerning trends in international metal prices in the presence of nonstationary volatility," Resource and Energy Economics, Elsevier, vol. 71(C).
    9. Lu, Huaixin & Liao, Xinlin & Wu, Youqun, 2024. "From resource curse to green renaissance: Analyzing the dynamics of natural resource abundance on China's green total factor productivity during business cycles," Resources Policy, Elsevier, vol. 89(C).
    10. Hassler, J. & Krusell, P. & Smith, A.A., 2016. "Environmental Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1893-2008, Elsevier.
    11. Juan B'ogalo & Pilar Poncela & Eva Senra, 2020. "Understanding fluctuations through Multivariate Circulant Singular Spectrum Analysis," Papers 2007.07561, arXiv.org, revised Aug 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baffes, John & Kabundi, Alain, 2023. "Commodity price shocks: Order within chaos?," Resources Policy, Elsevier, vol. 83(C).
    2. Addison, Tony & Ghoshray, Atanu, 2023. "Discerning trends in international metal prices in the presence of nonstationary volatility," Resource and Energy Economics, Elsevier, vol. 71(C).
    3. Margaret E. Slade & Henry Thille, 2009. "Whither Hotelling: Tests of the Theory of Exhaustible Resources," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 239-259, September.
    4. David Harvey & Neil Kellard & Jakob Madsen & Mark Wohar, 2012. "Trends and Cycles in Real Commodity Prices: 1650-2010," CEH Discussion Papers 010, Centre for Economic History, Research School of Economics, Australian National University.
    5. Xiaoyi Mu and Haichun Ye, 2015. "Small Trends and Big Cycles in Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    6. Cécile Couharde & Vincent Géronimi & Armand Taranco, 2012. "Les hausses récentes des cours des matières premières traduisent-elles l'entrée dans un régime de prix plus élevés ?," Revue Tiers-Monde, Armand Colin, vol. 0(3), pages 13-34.
    7. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    8. Jerrett, Daniel & Cuddington, John T., 2008. "Broadening the statistical search for metal price super cycles to steel and related metals," Resources Policy, Elsevier, vol. 33(4), pages 188-195, December.
    9. Soren T. Anderson & Ryan Kellogg & Stephen W. Salant, 2018. "Hotelling under Pressure," Journal of Political Economy, University of Chicago Press, vol. 126(3), pages 984-1026.
    10. Jeffrey Frankel, 2013. "A Solution to Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Jordi Galí (ed.),Fiscal Policy and Macroeconomic Performance, edition 1, volume 17, chapter 9, pages 323-391, Central Bank of Chile.
    11. Smith, James L., 2012. "On the portents of peak oil (and other indicators of resource scarcity)," Energy Policy, Elsevier, vol. 44(C), pages 68-78.
    12. Jair N. Ojeda-Joya & Oscar Jaulin-Mendez & Juan C. Bustos-Peláez, 2019. "The Interdependence Between Commodity-Price and GDP Cycles: A Frequency-Domain Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 47(3), pages 275-292, September.
    13. Franco Ruzzenenti & Andreas A. Papandreou, 2015. "Effects of fossil fuel prices on the transition to a low-carbon economy," Working papers wpaper89, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    14. Berger, Tino & Richter, Julia & Wong, Benjamin, 2022. "A unified approach for jointly estimating the business and financial cycle, and the role of financial factors," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    15. Abhijit Sharma & Kelvin G Balcombe & Iain M Fraser, 2009. "Non-renewable resource prices: Structural breaks and long term trends," Economics Bulletin, AccessEcon, vol. 29(2), pages 805-819.
    16. Alfred A. Haug & William G. Dewald, 2012. "Money, Output, And Inflation In The Longer Term: Major Industrial Countries, 1880–2001," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 773-787, July.
    17. Geronimi, Vincent & Taranco, Armand, 2018. "Revisiting the Prebisch-Singer hypothesis of a secular decline in the terms of trade of primary commodities (1900–2016). A dynamic regime approach," Resources Policy, Elsevier, vol. 59(C), pages 329-339.
    18. Roberto Ferreira da Cunha & Antoine Missemer, 2020. "The Hotelling rule in non‐renewable resource economics: A reassessment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(2), pages 800-820, May.
    19. Aleksandar Zaklan & Jan Abrell & Anne Neumann, 2011. "Stationarity Changes in Long-Run Fossil Resource Prices: Evidence from Persistence Break Testing," Discussion Papers of DIW Berlin 1152, DIW Berlin, German Institute for Economic Research.
    20. Ghoshray, A., 2018. "The Dynamic Properties of Natural Resource Prices," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277210, International Association of Agricultural Economists.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp201302. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jared Carbone (email available below). General contact details of provider: https://edirc.repec.org/data/decsmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.