Common factors and the dynamics of cereal prices. A forecasting perspective

Marek Kwas, Alessia Paccagnini and Michał Rubaszek

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This article investigates what determines the price dynamics of the main cereals: barley, maize, rice and wheat. Using an extensive dataset of monthly time series covering the years 1980 - 2019, we extract four different common factors explaining the dynamics of commodity prices, exchange rates, financial and macroeconomic indicators. Next, we examine whether these factors are useful in explaining the movements of cereal prices. We show that models incorporating all four factors outperform significantly the naive random walk model in out-of-sample forecasting competition, especially for longer horizons. However, they have only marginally better performance than a simpler model based on the commodity factor alone.

Keywords: Cereal prices; Forecasting; Factor models; Autoregressive models. (search for similar items in EconPapers)
JEL-codes: C32 C53 Q11 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2020-05
New Economics Papers: this item is included in nep-agr, nep-for and nep-ore
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Citations: View citations in EconPapers (1)

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https://cama.crawford.anu.edu.au/sites/default/fil ... agnini_rubaszek1.pdf (application/pdf)

Related works:
Journal Article: Common factors and the dynamics of cereal prices. A forecasting perspective (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2020-47

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