Are Commodity Prices More Volatile Now? A Long-Run Perspective

35 Pages Posted: 20 Apr 2016

See all articles by Oscar Calvo‐González

Oscar Calvo‐González

World Bank

Rashmi Shankar

World Bank

Riccardo Trezzi

Board of Governors of the Federal Reserve System

Date Written: October 1, 2010

Abstract

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.

Keywords: Markets and Market Access, Emerging Markets, Access to Markets, Commodities, Economic Conditions and Volatility

Suggested Citation

Calvo-Gonzalez, Oscar and Shankar, Rashmi and Trezzi, Riccardo, Are Commodity Prices More Volatile Now? A Long-Run Perspective (October 1, 2010). World Bank Policy Research Working Paper No. 5460, Available at SSRN: https://ssrn.com/abstract=1699067

Oscar Calvo-Gonzalez (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Rashmi Shankar

World Bank ( email )

1818 H Street N.W.
Washington, DC 20433
United States

Riccardo Trezzi

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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