Agricultural commodity price dynamics and their determinants: A comprehensive econometric approach

Jesus Crespo Cuaresma, Jaroslava Hlouskova and Michael Obersteiner

Journal of Forecasting, 2021, vol. 40, issue 7, 1245-1273

Abstract: We present a comprehensive modelling framework aimed at quantifying the response of agricultural commodity prices to changes in their potential determinants. The problem of model uncertainty is assessed explicitly by concentrating on specification selection based on the quality of short‐term out‐of‐sample forecasts (1 to 12 months ahead) for the price of wheat, soybeans and corn. Univariate and multivariate autoregressive models (autoregressive [AR], vector autoregressive [VAR] and vector error correction [VEC] specifications, estimated using frequentist and Bayesian methods), specifications with heteroskedastic errors (AR conditional heteroskedastic [ARCH] and generalized AR conditional heteroskedastic [GARCH] models) and combinations of these are entertained, including information about market fundamentals, macroeconomic and financial developments, and climatic variables. In addition, we assess potential non‐linearities in the commodity price dynamics along the business cycle. Our results indicate that variables measuring market fundamentals and macroeconomic developments (and, to a lesser extent, financial developments) contain systematic predictive information for out‐of‐sample forecasting of commodity prices and that agricultural commodity prices react robustly to shocks in international competitiveness, as measured by changes in the real exchange rate.

Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://doi.org/10.1002/for.2768

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:jforec:v:40:y:2021:i:7:p:1245-1273

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

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