A Short Note on Updating the Grilli and Yang Commodity Price Index

In 1988, Enzo Grilli and Maw Cheng Yang published their seminal article on the long-run development of an index of 24 primary commodity prices (GYCPI) deflated by an index of manufactured goods' unit values. The sample of average annual primary commodity prices covers about 54 percent of the primary commodity trade in the index reference period, 1977–79 (Grilli and Yang 1988, p. 3, n. 2). The deflators considered for manufacturing prices were the U.S. manufacturing price index (USMPI) and the manufacturing unit value index (MUV).¹

Widely used and discussed, the Grilli and Yang data set has been extended by a number of researchers (for example, Lutz 1999; León and Soto 1997; Cashin and McDermott 2002). The data have been employed in a variety of contexts in later studies (for example, Bleaney and Greenaway 2001; Kim et al. 2003). Thus, the GYCPI data continue to enjoy wide popularity in their own right and as a benchmark for new approaches to empirical studies. However, because the data sources consulted for updates have differed, it may not always be clear when differences in results arise from differences in the data used and when they arise from differences in the econometric methodology employed.

The obvious need for occasional updates of the series is in marked contrast with the absence of an accessible central reference for suitable data sources and the appropriate weights to be applied to individual commodity prices over the various subindices. This note aims to identify suitable data sources and composite index and subindex weights. These have not all been directly and publicly available from an accessible source.² The data sources identified are a compromise between continuity with the original Grilli and Yang data and accessibility. The intention is to allow individual researchers a realistic opportunity to obtain identical updates of the Grilli and Yang index from clearly identified sources.

I. Data Sources for Updates

Data for updating the commodity price data come directly from the World Bank Development Prospects Group's primary commodity price database, the International Monetary Fund (IMF) commodity price tables, and the Organization for Economic Cooperation and Development (OECD) international trade by commodities statistics. Most of the World Bank's primary commodity prices and the IMF's commodity price tables are available online. Online access to the OECD trade statistics requires a subscription. MUV updates were obtained from the Global Economic Prospects team of the World Bank's Development Prospects Group.³

A possible cause of confusion is the frequent revisions of the reported data and the occasional lack of continuity in the available data series. Often, more than one series is available for one commodity, and the researcher will have to use discretion in selecting the most appropriate one. Obviously, a close correspondence to the historic series is desirable, but a perfect match may not always be possible.

The following list of the 24 commodities in the Grilli and Yang data set identifies the data series used to update them from 1987 onward. The IMF commodity price table data are identified by their series descriptors or series code. OECD trade data are identified by their four-digit Standard International Trade Classification, Revision 2 (SITC Rev. 2) code. Data obtained directly from the primary commodity price database of the World Bank's Development Prospects Group are also identified.⁴ Any decision to deviate from the data series used in the original GYCPI data set is identified in the commodity description.⁵

• Aluminium: London Metal Exchange (LME), unalloyed primary ingots, high grade, minimum 99.7 percent purity, from the primary commodity price database.

• Bananas: Central and South American, U.S. import price, free on truck (f.o.t.) gulf ports, from the primary commodity price database.

• Beef: IMF commodity price tables series PBEEF, beef, Australian and New Zealand 85 percent lean fores. These data deviate from the Argentinean export unit values used in the original study, which were obtained from Argentinean national statistics (“Comercio Exterior” Argentina, Instituto Nacional de Estadística y Censos). The national statistics are not readily available online or in print at the required level of detail.

• Cocoa: International Cocoa Organization daily price, average of the first three positions on the terminal markets of New York and London, nearest three future trading months, from the primary commodity price database.

• Coffee: International Coffee Organization, other mild Arabica, from the primary commodity price database.

• Copper: LME grade A minimum 99.9935 percent purity, cathodes and wire bar shapes, settlement price, from the primary commodity price database.

• Cotton: Cotton Outlook A Index, middling 1 (3/32) inch staple, Europe cost, insurance, and freight (c.i.f.), from the primary commodity price database.

• Hides: IMF commodity price tables series PHIDE, hides, heavy native steers, over 53 pounds.

• Jute: Raw white D, free on board (f.o.b.) Chittagong. This series, obtained directly from the World Bank and quoted on the Pink Sheets, was discontinued after 2004. More recent jute prices are quoted by the Food and Agriculture Organization (FAO).⁶

• Lamb: New Zealand, frozen whole carcasses, wholesale price; London, from the primary commodity price database.

• Lead: LME refined, 99.97 percent purity, settlement price, from the primary commodity price database.

• Maize: U.S. no. 2 yellow, f.o.b. gulf port, from the primary commodity price database.

• Palm oil: 5 percent bulk, Malaysian, c.i.f. NW Europe, from the primary commodity price database.

• Rice: Thai 5 percent, milled, indicative price based on weekly surveys of export transactions, government standard, f.o.b. Bangkok, from the primary commodity price database. The original Grilli and Yang data set used the Board of Trade–posted price series, which was phased out after 1991. In the interest of continuity, the series from the primary commodity price database is used for the updated series from 1987 onward.

• Rubber: RSS no.1 Rubber Traders Association spot New York, from the primary commodity price database.

• Silver: Handy & Harman 99.9 percent New York, from the primary commodity price database.

• Sugar: International Sugar Agreement daily price, raw, f.o.b. and stowed at greater Caribbean ports, from the primary commodity price database.

• Tea: Three-auction average (Kolkata, Colombo, Mombasa), from the primary commodity price database. The original Grilli and Yang data set used the London auctions series, which was phased out in 1998. In the interest of continuity, the three-auction average listed in the World Bank's Pink Sheets is used in the updated series from 1987 onward.

• Timber: OECD international trade by commodities statistics, through ESDS International, UK import unit values, SITC Rev.2 series 2482 (sawn wood, coniferous species).

• Tin: LME 99.85 percent purity, settlement price, from the primary commodity price database.

• Tobacco: U.S. import unit values, unmanufactured leaves. Data were obtained directly from the primary commodity price database of the World Bank's Development Prospects Group.⁷

• Wheat: No.1 Canadian western red spring, in store, St Lawrence, export price, from the primary commodity price database.

• Wool: IMF commodity price tables series PWOOLC, wool, coarse, 23 micron, Australian Wool Exchange spot quote.

• Zinc: LME, special high grade, minimum 99.995 percent purity, weekly average bid/asked price, official morning session; prior to April 1990, high grade, minimum 99.95 percent purity, settlement price, from the primary commodity price database.

II. Further Details on Commodity Prices

All commodity price series have been indexed to their 1977–79 average in constructing the GYCPI and its subindices. Both the new data and the original Grilli and Yang component series were first indexed to their 1980 values, and the updated component of this series was subsequently indexed to the 1977–79 average of the combined index series. Table 1 shows the 1977–79 index values for each commodity, as well as the 1990 and 2000 index values, to facilitate future extensions of the series.

The individual commodity price series can be used to update the GYCPI and its various subindices.

III. Reconstructing the Grilli and Yang Commodity Price Index

This section provides further information on how to reconstruct the GYCPI commodity price index and the various subindices mentioned in Grilli and Yang (1988) from individual price series.

The Index and Subindices

The basic GYCPI is a trade-weighted average of all 24 of the commodity price series shown in table 1. In addition, Grilli and Yang (1988) constructed subindices for agricultural food commodities (GYCPIF), nonfood agricultural commodities (GYCPINF), and metals (GYCPIM). The weights are based on each commodity's average export share during the 1977–79 base period and are quoted for the GYCPI as percentage weights in Cuddington (1992) and in table 1.

The GYCPI relative to the MUV index and the update undertaken here are shown in figure 1. Weights for the subindices are easily reconstructed from the percentage shares for the overall index.⁸

The properties of this alternative index are discussed in depth by Cuddington and Wei (1992). This note reports geometric index alternatives alongside the conventional arithmetic aggregations in the Appendix and in figure 2.

The GYCPIF, GYCPINF, and GYCPIM subindices are listed together with the GYCPI and the MUV in Grilli and Yang (1988) for the period 1900–86. A comparison of the indices reconstructed on the basis of the weights shown in table 1 with those in Grilli and Yang (1988) shows a close overall correspondence for the 1900–86 period.

Table 1 lists the percentage shares for each commodity in the overall GYCPI index and the weights for the food, nonfood, and metals indices (last column).

The Manufacturing Unit Value index

The deflator used alongside the GYCPI index is the manufacturing unit value index, currently implemented as the MUV-G5 index.⁹ It is a trade-weighted index of the five major developed countries' (France, Germany, Japan, United Kingdom, and United States) exports of manufactured commodities to developing countries. The most frequently used deflator in the literature, the MUV, is also used by the World Bank. As a measure of developing country imports, it is far from perfect. Its use in the present context is based on the rather strong assumption that G-5 manufacturing exports are generally representative of developing country imports. However, the MUV is the only readily available trade-based manufacturing price measure available over a suitably long time horizon, which explains its continued use.

Updates of the MUV index were obtained from the World Bank Development Prospects Group, Global Economic Prospects team.¹⁰ At the time of writing, the MUV is typically indexed to a 1990 base, whereas Grilli and Yang consistently use the 1977–79 average as their base period. The 1977–79 average for the MUV with a base year of 1990 is 60.008. This figure can be used to reindex the series.

IV. Conclusion

This note has explained how to update the Grilli and Yang index and how to obtain index weights for the various subindices of the GYCPI. This method can also be used to compile new subindices from subsets of the individual data series. In the future, it would seem highly desirable for the World Bank or the IMF to publish updates to the GYCPI and its component indices. Meanwhile, this note should enable interested researchers to extend the Grilli and Yang index series further in the absence of a published updated version.

The authors thank the late Enzo Grilli for providing background information on data sources and Betty Dow for providing data from the primary commodity price database. They are also indebted to Prof. David Sapsford and Dr Paul Cashin as well as three anonymous referees for helpful comments. Stephan Pfaffenzeller gratefully acknowledges the financial support provided by a UK Ministry of Agriculture, Fisheries, and Food (MAFF) studentship. Supplemental appendixes to this article are available at http://wber.oxfordjournals.org/.

Appendix. Commodity Price Indices

This appendix lists the various commodity price indices¹¹ and the MUV as well as an update of the data published in Grilli and Yang (1988). All series are indexed to their 1977–79 averages.

The price indices listed are as follows:

• GYCPI: the Grilli and Yang commodity price index;

• MUV: the manufacturing unit value index;

• GYCPIM: the metals index (aluminium, copper, lead, silver, tin, and zinc);

• GYCPINF: the index of agricultural nonfood commodities (cotton, hides, jute, rubber, timber, tobacco, and wool);

• GYCPIF: the index of agricultural food commodities (bananas, beef, cocoa, coffee, lamb, maize, palm oil, rice, sugar, tea, and wheat).

• Alternative geometric aggregations of the composite indices are identified by a CW suffix in the following table.