Economics, Econometrics and Finance
4 years ago

New storage model reveals hidden trends impacting commodity prices and policies.

American Journal of Agricultural Economics
Putting the Empirical Commodity Storage Model Back on Track: Crucial Implications of a “Negligible” Trend
Eugenio Bobenrieth, Juan Bobenrieth, Ernesto Guerra, Brian D. Wright, Di Zeng

Paper Summary

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The article introduces a new model for understanding commodity prices and policies. By considering nonstationarity and a non‐negativity constraint, the model estimates price trends and interest rates. It identifies two dynamic regimes: one with stochastic price trends and another with expected price jumps. Neglecting small trends can lead to higher measured price autocorrelation and variation.