IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
IMF Working Papers describe research in progress by the author(s) and are published to elicit
comments and to encourage debate. The views expressed in IMF Working Papers are those of the
author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Using the longest dataset publicly available (The Economist's index of industrial commodity prices), we analyze the behavior of real commodity prices over the period 1862-99, and have two main findings. First, while there has been a downward trend in real commodity prices of 1.3 percent per year over the last 140 years, little support is found for a break in the long-run trend decline in commodity prices. Second, there is evidence of a ratcheting up in the variability of price movements. The amplitude of price movements increased in the early 1900s, while the frequency of large price movements increased after the collapse of the Bretton Woods regime of fixed exchange rates in the early 1970s. While there is a downward trend in real commodity prices, this is of little practical policy relevance as it is small and completely dominated by the variability of prices.