Relative Commodity Prices and Cointegration

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.