On The Solution Of The Dynamic Rational Expectations Commodity Storage Model In The Presence Of Stockholding By Speculators And Processors
The paper extends the literature of the dynamic rational expectations commodity storage model, to the case where speculators (speculative stocks) and processing firms (working stocks) are stockholders.So far the literature has been focused on solving the storage model for each type of stockholder independently, either for the case of speculative storage (see Williams and Wright, 1991 and Deaton and Laroque, 1992), or for the case of working stocks (Carter and Revoredo, 1999, show that the supply of storage cost approach - Miranda and Glauber, 1993; and Miranda and Rui, 1996 - reflects only the stocks carried by processing firms, when inventories of commodities (raw materials) are modeled as factors of production following Ramey, 1989). Almost no effort has been made for modeling the interaction of both agents (a notable exception is Lowry, 1988 but not in the context of the competitive storage model). The interaction of both agents is crucial to capture a higher number of stylized facts in commodity markets, such as the dynamic behavior of commodity prices (see Deaton and Laroque, 1992 and Miranda and Rui, 1996), and the Working curve (i.e., empirical curve that relates commodity price spreads with stocks, see Working, 1933).The model is solved by means of a modified version of the polynomial approximation technique used by Williams and Wright (1991). Two versions of the algorithm are presented (with and without a price responsive supply). Finally, the model is simulated to show the differences in the resulting market demand with respect to the other two models (speculative stocks and working stocks) and the differences in the resulting Working curves.
|Date of creation:||05 Jul 2000|
|Contact details of provider:|| Postal: CEF 2000, Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25,27, 08005, Barcelona, Spain|
Fax: +34 93 542 17 46
Web page: http://enginy.upf.es/SCE/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ramey, Valerie A. & West, Kenneth D., 1999.
Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 13, pages 863-923
- Valerie A. Ramey & Kenneth D. West, 1997. "Inventories," NBER Working Papers 6315, National Bureau of Economic Research, Inc.
- repec:crs:wpaper:8909 is not listed on IDEAS
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
- Williams,Jeffrey C. & Wright,Brian D., 2005. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521023399, October.
- Williams,Jeffrey C. & Wright,Brian D., 1991. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, number 9780521326162, October.
- Working, Holbrook, 1933. "Price Relations Between July And September Wheat Futures At Chicago Since 1885," Wheat Studies, Stanford University, Food Research Institute, issue 06, March.
- Ng, Serena, 1996. "Looking for evidence of speculative stockholding in commodity markets," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 123-143.
- Ng, S., 1995. "Looking for Evidence of Speculative Stockholding in Commodity Markets," Cahiers de recherche 9514, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Ng, S., 1995. "Looking for Evidence of Speculative Stockholding in Commodity Markets," Cahiers de recherche 9514, Universite de Montreal, Departement de sciences economiques.
- Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 1-23.
- Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Development Studies.
- Angus Deaton & Guy Laroque, 1990. "On The Behavior of Commodity Prices," NBER Working Papers 3439, National Bureau of Economic Research, Inc.
- Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Public and International Affairs.
- 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.
- Gray, Roger W. & Peck, Anne E., 1981. "The Chicago Wheat Futures Market: Recent Problems in Historical Perspective," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
- Gilbert, Christopher L., 1990. "The rational expectations hypothesis in models of primary commodity prices," Policy Research Working Paper Series 384, The World Bank.
- Wright, Brian D, 1979. "The Effects of Ideal Production Stabilization: A Welfare Analysis Under Rational Behavior," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1011-1033, October.
- Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-1022, July.
- 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.
- Chambers, Marcus J & Bailey, Roy E, 1996. "A Theory of Commodity Price Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 924-957, October.
- Bailey, RE & Chambers, MJ, 1994. "A Theory of Commodity Price Fluctuations," Economics Discussion Papers 2772, University of Essex, Department of Economics.
- Newbery, David M, 1989. "The Theory of Food Price Stabilisation," Economic Journal, Royal Economic Society, vol. 99(398), pages 1065-1082, December.
- 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.
- Bruce L. Gardner & Ramón López, 1996. "The Inefficiency of Interest-Rate Subsidies in Commodity Price Stabilization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 508-516.
- Gardner, Bruce L. & Lopez, Ramon, 1993. "The Inefficiency of Interest Rate Subsidies in Commodity Price Stabilization," Working Papers 197794, University of Maryland, Department of Agricultural and Resource Economics.
- Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233-233.
- Lowry, M. Newton, 1988. "Working stocks and speculative stocks," Economics Letters, Elsevier, vol. 28(4), pages 311-314. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:sce:scecf0:42. 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: (Christopher F. Baum)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.