TY  - JOUR
AU  - Lee,Junsoo
AU  - List,John A.
AU  - Strazicich,Mark
TI  - Nonrenewable Resource Prices: Deterministic or Stochastic Trends?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11487
PY  - 2005
Y2  - July 2005
UR  - http://www.nber.org/papers/w11487
L1  - http://www.nber.org/papers/w11487.pdf
N1  - Author contact info:
Junsoo Lee

John List
Department of Economics
University of Chicago
1126 East 59th
Chicago, IL 60637
Tel: 301/405-1288
Fax: 301/314-9091
E-Mail: jlist@uchicago.edu

Mark Strazicich
M2  - featured in NBER digest on 2005-07-18
AB  - In this paper we examine temporal properties of eleven natural resource real price series from 1870-1990 by employing a Lagrangian Multiplier unit root test that allows for two endogenously determined structural breaks with and without a quadratic trend. Contrary to previous research, we find evidence against the unit root hypothesis for all price series. Our findings support characterizing natural resource prices as stationary around deterministic trends with structural breaks. This result is important in both a positive and normative sense. For example, without an appropriate understanding of the dynamics of a time series, empirical verification of theories, forecasting, and proper inference are potentially fruitless. More generally, we show that both pre-testing for unit roots with breaks and allowing for breaks in the forecast model can improve forecast accuracy.
ER  -