Mean-Reversion in Unprocessed Food Prices

Mean-Reversion in Unprocessed Food Prices

Title:

Mean-Reversion in Unprocessed Food Prices

Number:

17/03

Author(s):

Kurmaş Akdoğan

Language:

English

Date:

February 2017

Abstract:

The high volatility in food prices in the last decade is a major concern for policymakers across the globe. This study tests if there is mean-reverting behaviour in the unprocessed food prices towards a long-run trend, for twenty-four European countries, using linear and nonlinear unit root tests. The results indicate linear or non-linear mean reversion for more than one-third of the group. Non-linear models are useful in detecting asymmetric correction behaviour, depending on the size and sign of the deviation from the mean. However, out-of-sample forecasting performances of these models are poor relative to a simple autoregressive benchmark.

Keywords:

Food prices, Unit root test, Nonlinearity, Forecasting

JEL Codes:

Q11; C32; C53

Mean-Reversion in Unprocessed Food Prices
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