Federal Reserve Bank of Atlanta
FRB Atlanta Working Paper
A staggered pricing approach to modeling speculative storage: implications for commodity price dynamics
This paper embeds a staggered price feature into the standard speculative storage model of Deaton and Laroque (1996). Intermediate goods inventory speculators are added as an additional source of intertemporal linkage, which helps us to replicate the stylized facts of the observed commodity price dynamics. Incorporating this type of friction into the model is motivated by its ability to increase price stickiness which, gives rise to a higher degree of persistence in the first two conditional moments of commodity prices. The structural parameters of our model are estimated by the simulated method of moments using actual prices for four agricultural commodities. Simulated data are then employed to assess the effects of our staggered price approach on the time series properties of commodity prices. Our results lend empirical support to the possibility of staggered prices.
Cite this item
Hirbod Assa & Amal Dabbous & Nikolay Gospodinov, A staggered pricing approach to modeling speculative storage: implications for commodity price dynamics, Federal Reserve Bank of Atlanta, FRB Atlanta Working Paper 2013-08, 01 Sep 2013.
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
Keywords: commodity price determination; staggered pricing; high persistence; conditional heteroskedasticity; simulated method of moments
This item with handle RePEc:fip:fedawp:2013-08
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