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Stochastic Model Development and Price Volatility Analysis

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  • Shinichi Taya

    (OECD)

Abstract

The OECD-FAO Agricultural Outlook provides mid-term projections of global agricultural markets simulated by the AGLINK-COSIMO model. While the projections typically present a deterministic outlook for markets that are conditional on a set of assumptions, recent experience of highly turbulent markets has renewed interest in quantitative assessment of price volatility by stochastic simulations using the AGLINK-COSIMO model. Improvements in the methodology of stochastic analyses are pursued and implemented. As an application, the impact of crop yield shocks on price volatility is studied. Since the concurrent reduction in production in different countries is deemed as one of the factors of the price spike in 2007/08, the contribution of correlation of yield shocks to price volatility is measured. This paper shows that correlation effects account for a significant portion of price volatility for coarse grains and wheat.

Suggested Citation

  • Shinichi Taya, 2012. "Stochastic Model Development and Price Volatility Analysis," OECD Food, Agriculture and Fisheries Papers 57, OECD Publishing.
  • Handle: RePEc:oec:agraaa:57-en
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    File URL: http://dx.doi.org/10.1787/5k95tmlz3522-en
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    Cited by:

    1. Araujo Enciso, Sergio René & Fellmann, Thomas & Pérez Dominguez, Ignacio & Santini, Fabien, 2016. "Abolishing biofuel policies: Possible impacts on agricultural price levels, price variability and global food security," Food Policy, Elsevier, vol. 61(C), pages 9-26.

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    Keywords

    coarse grains; correlation; rice; stochastic simulations; variability; volatility; wheat;

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