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Bayesian Estimation of the Storage Model using Information on Quantities

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  • Gouel, Christophe
  • Legrand, Nicolas

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.
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Suggested Citation

  • Gouel, Christophe & Legrand, Nicolas, 2016. "Bayesian Estimation of the Storage Model using Information on Quantities," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235599, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea16:235599
    DOI: 10.22004/ag.econ.235599
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    References listed on IDEAS

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    5. Christophe Gouel & Nicolas Legrand, 2017. "Estimating the Competitive Storage Model with Trending Commodity Prices," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(4), pages 744-763, June.
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    Cited by:

    1. Nicolas Legrand, 2019. "The Empirical Merit Of Structural Explanations Of Commodity Price Volatility: Review And Perspectives," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 639-664, April.

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    More about this item

    Keywords

    Demand and Price Analysis; Research Methods/ Statistical Methods;

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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