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Agricultural Commodity Price Dynamics: Evidence from BVAR Models

Olga Bondarenko ()
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Olga Bondarenko: National Bank of Ukraine

No 03/2023, Working Papers from National Bank of Ukraine

Abstract: Agricultural commodity markets have experienced bouts of significant volatility in recent years, drawing the attention of policymakers all over the world. This paper studies the dynamics of wheat and corn prices since 1999 through the lens of standard BVAR models in the spirit of Kilian (2009) and Kilian and Murphy (2014). I use monthly revisions of the WASDE supply projections to overcome the problem of limited availability of high-frequency data and develop an indicator of aggregate demand for grains, following Baumeister et al. (2020). The estimated elasticities are generally consistent with theory and earlier studies and produce reasonable historical decompositions. Models are helpful in forecasting exercises, including conditional forecasts and alternative scenarios while they perform no better than the random walk in short-term unconditional forecasting.

Keywords: commodity prices; corn; wheat; BVAR models; demand elasticity; supply elasticity; historical decomposition; USDA supply forecasts; WASDE (search for similar items in EconPapers)
JEL-codes: C32 C51 Q11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2023-08
New Economics Papers: this item is included in nep-agr and nep-tra
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