Bayesian Estimation of the Storage Model using Information on Quantities

Gouel, Christophe and Legrand, Nicolas (2017) Bayesian Estimation of the Storage Model using Information on Quantities. TSE Working Paper, n. 17-776, Toulouse

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Official URL: http://tse-fr.eu/pub/31555

Abstract

This paper presents a new strategy to estimate the rational expectations storage model. It uses information on prices and quantities – consumption and production – in contrast to previous approaches which use only prices. This additional information allows us to estimate a model with elastic supply, and to identify parameters such as supply and demand elasticities, which are left unidentified when using prices alone. The estimation relies on the Bayesian methods popularized in the literature on the estimation of DSGE models. It is carried out on a market representing the caloric aggregate of the four basic staples – maize, rice, soybeans, and wheat – from 1961 to 2006. The results show that to be consistent with the observed volatility of consumption, production, and price, elasticities have to be in the lower ranges of the elasticities in the literature, a result consistent with recent instrumental variable estimations on the same sample.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Commodity price dynamics, storage, Bayesian inference
JEL codes: C51 - Model Construction and Estimation
C52 - Model Evaluation and Selection
Q11 - Aggregate Supply and Demand Analysis; Prices
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Mar 2017 14:50
Last Modified: 07 Mar 2018 13:24
OAI ID: oai:tse-fr.eu:31555
URI: http://publications.ut-capitole.fr/id/eprint/23203

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