Date of Award

2013

Document Type

Master's Thesis

Degree Name

Master of Science in Applied Natural Resource Economics (MS)

College, School or Department Name

School of Business and Economics

Advisor

Mark C Roberts

DOI

10.37099/mtu.dc.etds/674

Abstract

This thesis analyzes the long-term trend behavior and cyclical components of real base metal prices. A decomposition approach is used to separate the real prices of base metals into a time trend and cyclical components. In this regard, linear and quadratic detrending methods along with Hodrick-Prescott and Baxter-King filters are applied to the base metal prices. Linear and quadratic trendlines are good estimates of the trend component and easy to interpret if the coefficients of estimated trends are significant and the coefficient of determination is relatively high. The Hodrick-Prescott and Baxter-King filters are good fits to the price series, but they affect the cyclical component. Loss of data points and altering the moments of the cyclical component are the disadvantages of filtering methods. On the other hand, the linear detrending methods are weak in removing unit roots in the series. This study shows that the choice of detrending method affects the cyclical component of base metal prices, and consequently the identification of cycles depends on the detrending method.

Included in

Economics Commons

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