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Keywords = Prebisch-Singer hypothesis

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17 pages, 405 KB  
Article
A Reappraisal of the Prebisch-Singer Hypothesis Using Wavelets Analysis
by Hany Fahmy
J. Risk Financial Manag. 2021, 14(7), 319; https://doi.org/10.3390/jrfm14070319 - 12 Jul 2021
Cited by 2 | Viewed by 5240
Abstract
The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the [...] Read more.
The Prebisch-Singer (PS) hypothesis, which postulates the presence of a downward secular trend in the price of primary commodities relative to manufacturers, remains at the core of a continuing debate among international trade economists. The reason is that the results of testing the PS hypothesis depend on the starting point of the technical analysis, i.e., stationarity, nonlinearity, and the existence of structural breaks. The objective of this paper is to appraise the PS hypothesis in the short- and long-run by employing a novel multiresolution wavelets decomposition to a unique data set of commodity prices. The paper also seeks to assess the impact of the terms of trade (also known as Incoterms) on the test results. The analysis reveals that the PS hypothesis is not supported in the long run for the aggregate commodity price index and for most of the individual commodity price series forming it. Furthermore, in addition to the starting point of the analysis, the results show that the PS test depends on the term of trade classification of commodity prices. These findings are of particular significance to international trade regulators and policymakers of developing economies that depend mainly on primary commodities in their exports. Full article
(This article belongs to the Special Issue Financial and Panel Data Econometrics)
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