Cost Pass‐Through in Commodity Markets With Capacity Constraints and International Linkages

Reinhard Ellwanger, Hinnerk Gnutzmann and Piotr Śpiewanowski

Journal of Applied Econometrics, 2025, vol. 40, issue 2, 149-163

Abstract: We examine how regional cost shocks are passed through into the prices of globally traded energy‐intensive commodities. We find that the pass‐through of local costs is influenced by production capacity in the short run. When capacity constraints become binding, the pass‐through of cost shocks to the constrained region diminishes to zero. Our application to the market for ammonia, a commodity largely produced from natural gas, demonstrates the significance of capacity constraints and international market linkages for empirical pass‐through models.

Date: 2025
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/jae.3098

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:40:y:2025:i:2:p:149-163

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().