Storage and the Volatility of Agricultural Prices: A Model of Endogenous Fluctuations
Fordham Economics Department Discussion Paper 2008 -11
21 Pages Posted: 12 Oct 2013
Date Written: November 1, 2009
Recent developments in world food markets stress the importance of identifying the sources of food price volatility. This paper develops a nonlinear Cobweb model with endogenous volatility which accounts for several characteristics of agricultural commodity markets (seasonality, storage) and leads to price series with positive skewness and auto-correlation, as in actual commodity prices. Practical consequences may imply a rethinking of the current methods of world food market regulation.
Keywords: Price volatility, storage, chaos theory, agricultural markets
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