A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price
AbstractOver the last decade, commodity prices have registered substantial booms and busts marked by extreme volatility. Wheat in particular, one of the main non-oil commodities, has registered a roller-coaster in price levels which seems to be inconsistent with supply and demand fundamentals. To acutely investigate the drivers of wheat prices and quantify their impact, a Vector Error Correction Model (VECM) has been used. The exogenous variables have been distinguished into four groups: market-specific factors, broad macroeconomic determinants, speculative components, and weather variables. The quadriangulation of the determinants will enable us to better understand the movements in wheat price and identify the specific role of each component. The results show a mix of short and long term factors that are contributing to wheat price movements, and their effect should be taken into account in designing proper policy intervention to mitigate the negative impact of price shocks.
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Bibliographic InfoPaper provided by University of Bonn, Center for Development Research (ZEF) in its series Discussion Papers with number 145556.
Date of creation: Feb 2013
Date of revision:
wheat price; fundamentals; speculation; Agribusiness; Agricultural and Food Policy; Agricultural Finance; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Food Security and Poverty; Institutional and Behavioral Economics; International Relations/Trade; Political Economy; C22; E31; Q11;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
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