Hotelling rules: oscillatory versus quadratic trends in natural resource prices
Working Paper 126
A model is introduced for the description of natural resources price paths, which, in contrast to the existing literature, captures non-linear trends by means of a simple trigonometric function. This model is then compared by means of a set of model selection criteria with a quadratic trend model and with a more general one that nests both models.
All models are estimated on the price series of eleven major natural resources. In most cases, the trigonometric trend model is selected as the one better fitting the data, providing evidence against the long-run increase of the corresponding natural resource real prices, with interesting policy implications.
Antonios Antypas, Phoebe Koundouri and Nikolaos Kourogenis