Bayesian Estimation of the Storage Model using Information on Quantities
Christophe Gouel () and
Nicolas Legrand ()
No 17-776, TSE Working Papers from Toulouse School of Economics (TSE)
This paper presents a new strategy to estimate the rational expectations storage model. It uses information on prices and quantities – consumption and production – in contrast to previous approaches which use only prices. This additional information allows us to estimate a model with elastic supply, and to identify parameters such as supply and demand elasticities, which are left unidentified when using prices alone. The estimation relies on the Bayesian methods popularized in the literature on the estimation of DSGE models. It is carried out on a market representing the caloric aggregate of the four basic staples – maize, rice, soybeans, and wheat – from 1961 to 2006. The results show that to be consistent with the observed volatility of consumption, production, and price, elasticities have to be in the lower ranges of the elasticities in the literature, a result consistent with recent instrumental variable estimations on the same sample.
Keywords: Commodity price dynamics; storage; Bayesian inference (search for similar items in EconPapers)
JEL-codes: C51 C52 Q11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge
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Working Paper: Bayesian Estimation of the Storage Model using Information on Quantities (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:31555
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