Capital Markets and Grain Prices: Assessing the Storage Cost Approach

Wolfgang Keller, Carol H. Shiue and Xin Wang

No HIAS-E-74, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: This paper evaluates an approach to shed light on capital markets using grain prices, since stored grain incurs interest costs as part of the storage costs. Though this storage cost approach has been applied in McCloskey and Nash (1984) and has potentially wide applicability in situations where interest rate data is not available, this paper provides the first analysis of how well the storage cost approach captures actual capital market developments. Using matched data on bank interest rates and grain prices for early 19th century U.S. regions, we find that the storage cost approach is useful for quantifying the performance of capital markets. While the estimation of region- and year-specific interest rates can be challenging, the approach grain price approach accurately reflects differences in capital market development. Furthermore, the approach is robust to employing time series filtering techniques as well as dealing with unavailable information on harvest times, outliers, and a range of other factors.

Keywords: Capital market integration; Financial economic development; U.S. economic history (search for similar items in EconPapers)
Pages: 60 pages
Date: 2018-09
New Economics Papers: this item is included in nep-fdg
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Citations: View citations in EconPapers (1)

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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29583/070_hiasDP-E-74.pdf

Related works:
Journal Article: Capital markets and grain prices: assessing the storage cost approach (2020)
Working Paper: Capital Markets and Grain Prices: Assessing the Storage Cost Approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-74

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