Making the world market price endogenous within the AGMEMOD modelling framework: an econometric solution

Giulia Listorti and Roberto Esposti

No 6659, 107th Seminar, January 30-February 1, 2008, Sevilla, Spain from European Association of Agricultural Economists

Abstract: This paper aims at making the world price endogenous within the AGMEMOD modelling approach. This approach constructs country-level commodity market models where supply and demand sides are equalized on the basis of the observed domestic prices. These prices are endogenous as they depend (price transmission equation) on a EU key-price, which is, in turn, endogenously determined by the world price (price formation equation). The world prices, however, are assumed to be exogenous. To make the world price endogenous, we propose a system of equations where the EU key-price and the world price are simultaneously determined. This system of equations, written in a dynamic and error-correction form (VECM), substitutes the usual price-formation equation, while price transmission across EU countries remains unaffected. This approach is here applied to the case of soft wheat and results compared to those obtained by using the conventional AGMEMOD approach.

Keywords: Demand and Price Analysis; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 15
Date: 2008
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa107:6659

DOI: 10.22004/ag.econ.6659

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