IDEAS home Printed from https://ideas.repec.org/p/ags/eaae17/261281.html
   My bibliography  Save this paper

Impacts of Inventory Management on Price Volatility in Agricultural Commodity Markets: Insights from a System Dynamics Model

Author

Listed:
  • Berg, Ernst

Abstract

Recent fluctuations of agricultural commodity prices have stimulated the debate on the potential causes of price volatility. One explanation is that weather shocks or other external factors perturb supply, thus leading to price fluctuations. An alternative explanation proposes that the persistent fluctuations are the result of nonlinear dynamics and would even occur in the absence of external shocks. This paper focuses on the latter explanation. We investigate under which conditions price volatility is primarily caused by nonlinear dynamics. Using a system dynamics modelling approach we show that plausible behaviour of actors can lead to persistent price fluctuations, even in the absence of external shocks.

Suggested Citation

  • Berg, Ernst, 2017. "Impacts of Inventory Management on Price Volatility in Agricultural Commodity Markets: Insights from a System Dynamics Model," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261281, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae17:261281
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/261281/files/Berg%20E%20%282017%29%20Impacts%20of%20Inventory%20Management%20on%20Price%20Volatility%20in%20Agricultural%20Commodity%20Markets.pdf
    Download Restriction: no

    File URL: http://ageconsearch.umn.edu/record/261281/files/Berg%20E%20%282017%29%20Impacts%20of%20Inventory%20Management%20on%20Price%20Volatility%20in%20Agricultural%20Commodity%20Markets.pdf?subformat=pdfa
    Download Restriction: no

    References listed on IDEAS

    as
    1. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 1-23.
    2. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    3. Sophie Mitra & Jean‐Marc Boussard, 2012. "A simple model of endogenous agricultural commodity price fluctuations with storage," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 1-15, January.
    4. Miranda, Mario J & Glauber, Joseph W, 1993. "Estimation of Dynamic Nonlinear Rational Expectations Models of Primary Commodity Markets with Private and Government Stockholding," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 463-470, August.
    5. Mackey, Michael C., 1989. "Commodity price fluctuations: Price dependent delays and nonlinearities as explanatory factors," Journal of Economic Theory, Elsevier, vol. 48(2), pages 497-509, August.
    6. Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
    7. Berg, Ernst & Huffaker, Ray, 2015. "Economic Dynamics of the German Hog-Price Cycle," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 6(2), pages 1-17, July.
    8. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    9. Colin A. Carter & Gordon C. Rausser & Aaron Smith, 2011. "Commodity Booms and Busts," Annual Review of Resource Economics, Annual Reviews, vol. 3(1), pages 87-118, October.
    10. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
    11. V. Ernesto Alex Guerra & Eugenio Sebastián Antonio Bobenrieth H. & Juan Rodrigo Andrés Bobenrieth H. & Carlo Cafiero, 2015. "Editor's choice Empirical commodity storage model: the challenge of matching data and theory," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 42(4), pages 607-623.
    12. Gustafson, Robert L., 1958. "Carryover levels for grains: A method for determining amounts that are optimal under specified conditions," Technical Bulletins 157231, United States Department of Agriculture, Economic Research Service.
    13. Cafiero, Carlo & Bobenrieth H., Eugenio S.A. & Bobenrieth H., Juan R.A. & Wright, Brian D., 2011. "The empirical relevance of the competitive storage model," Journal of Econometrics, Elsevier, vol. 162(1), pages 44-54, May.
    14. Jean-Paul Chavas & Matthew T. Holt, 1993. "Market Instability and Nonlinear Dynamics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(1), pages 113-120.
    15. repec:eee:agisys:v:160:y:2018:i:c:p:98-109 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Agricultural and Food Policy; Marketing;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:eaae17:261281. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/eaaeeea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.