The authors revisit in this article the empirical foundation of the alleged secular decline in the prices of primary commodities relative to those of manufactures. They use a newly constructed index of commodity prices and two modified indexes of manufactured good prices, and find that from 1900 to 1986 the relative prices of all primary commodities fell on trend by 0.5 percent a year and those of nonfuel primary commodities by 0.6 percent a year. They thus confirm the sign, but not the magnitude, of the trend implicit in the work of Prebisch. But even the more limited secular decline shown by their relative price indexes may be magnified by an incomplete account of quality improvements in manufactures. They then show that the evolution of terms of trade of nonfuel primary commodities is not the same as that of the net barter terms of trade of non-oil-exporting developing countries. Finally, they find that despite the decline that has probably occurred during the current century in the terms of trade of nonfuel primary commodities, the purchasing power of total exports of these products has increased considerably. Similarly, the fall that may have occurred after World War II in the net barter terms of trade of developing countries seems to have been more than compensated for by the steady improvement in their income terms of trade.

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Primary commodity prices, manufactured goods prices, and the terms of trade of developing countries : what the long run shows

Long-run trends in 26 primary commodity prices

Primary commodity markets have offered an opportunity for much economic debate on a number of key issues First, secularly declining terms of trade of primary commodities are used to explain the widening gap between developing (LDCs) and developed countries (DCs) Second, they are regarded as a contributing factor to the creation of a structural condition of unequal exchange between a "dominating" industrial center and a "dominated" agrarian periphery And third, they are thought to be a source of instability, often causing financial vulnerability to foreign exchange equilibria and fragility to international market institutions

Trends in the Terms of Trade of Primary Commodities, 1900-1982: The Controversy and Its Origins

This paper provides a survey of a range of issues involved in the analysis of primary commodity prices and the terms of trade. Particular emphasis is placed upon the long-run behaviour of the terms of trade between primary commodities and manufactures and the paper presents some new evidence regarding the long-run behaviour of Australia's terms of trade.

Primary Commodity Prices and the Terms of Trade

The Prebisch–Singer hypothesis of a secular decline in the relative price of primary commodities is reassessed, on the basis of recently available time series data, for 1900–1986. Special attention is given to adequate dynamic modeling of price fluctuations. Primary and manufactured-goods prices are found to be cointegrated. The hypothesis of stationarity for the long-run relative-price movements cannot be rejected. The empirical evidence does not support the Prebisch–Singer hypothesis.

Relative Commodity Prices and Cointegration

This article traces the course of world commodity prices back to the middle of the 19th century and attempts to assess the changes in their purchasing value by deflating them by the export prices of manufactured goods. The purchasing power of commodity prices was in decline over long periods but they usually regained their earlier real value, or improved on it, in powerful upsurges of which the 1972-74 boom was the most recent; it was also unique in peacetime and, though with fluctuations, the purchasing value of commodities has since remained at a relatively high level.

G.F. Ray

Papers

The 'Real' Price of Primary Products: