Prague Economic Papers 1998, 7(3) | DOI: 10.18267/j.pep.156

Non-stationarity and structural breaks in mineral price and supply historical series

Stefano Mainardi

Mineral commodity prices and, to a lesser extent, supply have typically experienced substantial fluctuations as well as sudden, largely unanticipated, breaks. Instability has severe consequences in term of returns on mining investment and the balance of payments of the countries concerned. Studies on commodity instability ignore non-stationarity and tend to focus on relatively short time series. Other studies, that investigate whether economic variables behave as random walks or as mean-reverting series, seldom pay attention to structural breaks, end mainly examine macroeconomic variables. Following an overview of historical and methodological issues, which have raised different interpretations, an IO-ADF model is applied to metal price end supply series. Result lend support to both views on the long-run response of these variables to major historical shocks, depending on the metal.

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