Are Commodity Prices More Volatile Now? A Long-Run Perspective

Soaring commodity prices in 2007 and 2008 raised concerns that volatility was also rising, which would have implications for welfare and therefore for the design of public policy interventions. The literature focuses on trends in commodity prices rather than their volatility characteristics. This paper contributes by examining commodity price volatility with a newly compiled monthly panel dataset on 45 individual commodity prices from the end of the 18th century until today. The main conclusions are: the timing and number of breaks in volatility vary considerably across individual commodities, cautioning against generalizations based on the use of commodity price indices; the three most significant breaks common to most commodities are the two world wars and the collapse of the Bretton-Woods system; and structural breaks marking increased price volatility are followed by breaks marking declines in volatility so that there is no upward or downward trend in volatility over time.