The Prebisch-Singer Hypothesis: A Reappraisal Independent of Stationarity Hypotheses

Structural time series analysis, which requires no prior assumptions regarding stationarity and allows for a wide variety of behavior, reveals that the net barter terms of trade between primary commodities and manufactures has a negative deterministic trend over this century as hypothesized by R. Prebisch (1950) and H. Singer (1950). However, the rate of decline is only about half what is predicted using the data available to Prebisch and Singer. The authors' finding of secular deterioration is robust; it holds if data after the oil shock of 1973, or before a previously claimed structural shift in 1921, are excluded from the sample.