The role of storage in commodity markets: Indirect inference based on grain data

Christophe Gouel () and Nicolas Legrand ()
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Christophe Gouel: CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IFPRI - International Food Policy Research Institute [Washington] - CGIAR - Consultative Group on International Agricultural Research [CGIAR]
Nicolas Legrand: Virginia Polytechnic Institute and State University [Blacksburg], SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement

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Abstract: We develop an indirect inference approach relying on a linear supply and demand model serving as an auxiliary model to provide the first full empirical test of the rational expectations commodity storage model. We build a rich storage model that incorporates a supply response and four structural shocks and show that exploiting information on both prices and quantities is critical for relaxing previous restrictive identifying assumptions and assessing the empirical consistency of the model's features. Finally, we carry out a structural estimation on the aggregate index of the world's most important staple food products. Our estimations show that supply shocks are the main drivers of food market dynamics and that our storage model is consistent with most of the moments in the data, including the high price persistence so far the subject of a long‐standing puzzle.

Keywords: Monte Carlo analysis; Storage; Commodity price dynamics; Indirect inference (search for similar items in EconPapers)
Date: 2025
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-05108587v1
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Published in Quantitative Economics, 2025, 16 (2), pp.705-747. ⟨10.3982/QE2329⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05108587

DOI: 10.3982/QE2329

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