The Resource Curse, Commodity Prices and Economic Growth

The direction of trend in relative commodity prices has implications for many developing country growth rates. To assess causal underpinnings we create ultra- long aggregate series shaped by common factors. Tests show that series present a downward trend over the entire sample which can be broken into 4 regimes of predominantly increasing decline: 1650-1820, 1821-1872, 1873-1946 and 1947- 2010. We argue factors like technology are commensurate with this structure. Finally, we suggest the trend in economic activity is a proxy for such factors and show a negative relationship between trends in commodity prices and World GDP that helps explain the resource curse.