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A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price

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  • Algieri, Bernardina

Abstract

Over 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.

Suggested Citation

  • Algieri, Bernardina, 2013. "A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price," Discussion Papers 145556, University of Bonn, Center for Development Research (ZEF).
  • Handle: RePEc:ags:ubzefd:145556
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    Cited by:

    1. Adom, Philip Kofi, 2014. "Determinants of food availability and access in Ghana: what can we learn beyond the regression results?," Studies in Agricultural Economics, Research Institute for Agricultural Economics, vol. 116(3), December.
    2. Bernhard Brümmer & Olaf Korn & Kristina Schlüßler & Tinoush Jamali Jaghdani, 2016. "Volatility in Oilseeds and Vegetable Oils Markets: Drivers and Spillovers," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(3), pages 685-705, September.

    More about this item

    Keywords

    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;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; 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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