Search

Begin New Search Topic Commodities Author Christophe Gouel

1. Interest Rate Dynamics and Commodity Prices

Author:
Christophe Gouel, Qingyin Ma, and John Stachurski
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the channels of transmission are far from transparent, leading to long-running debates on the sign and magnitude of interest rate effects. Purely empirical studies struggle to address these issues because of the complex interactions between interest rates, prices, supply changes and aggregate demand. To move this debate to a solid footing, we extend the competitive storage model to include stochastically evolving interest rates. We establish general conditions for existence and uniqueness of solutions, as well as providing a systematic theoretical and quantitative analysis of the interactions between interest rates and prices.
Topic:
Economy, Commodities, and Interest Rates
Political Geography:
Global Focus

2. The Role of Storage in Commodity Markets: Indirect Inference Based on Grains Data

Author:
Christophe Gouel and Nicolas Legrand
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Understanding commodity prices dynamics is of crucial importance for assessing the persistence of cost-push costs or for countries dependent on commodity exports. Unfortunately, despite decades of research, the workhorse theoretical model in the field, the rational expectations storage model, is yet to be empirically validated. This paper provides the first full empirical test of the storage model. We first build a new storage model featuring a supply response, long-run demand and cost trends, and four structural shocks. We then develop a flexible empirical approach which relies on the indirect inference method and exploits the joint dynamics of prices and quantities unlike previous estimations which only use price information. The information contained in quantities is essential to relax restrictive identifying assumptions and empirically assess the overall consistency of the model's new features. Finally, we carry out a structural estimation on the aggregate index of the world most important staple food products: maize, rice, soybeans, and wheat. The results show that our extended storage model is consistent with most of the moments in the data, including the high price autocorrelation of which up to 42% can be explained by the transfer of inventories over time. They also show that, although for these commodities supply shocks are the main drivers of market dynamics, over the past 60 years all price spikes have been associated with large positive demand shocks.
Topic:
Agriculture, International Trade and Finance, Commodities, and Price
Political Geography:
Global Focus