Source: UNIV OF CALIFORNIA submitted to
COMMODITY MARKET MODELING: THEORY AND APPLICATIONS
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
REVISED
Funding Source
Reporting Frequency
Annual
Accession No.
0187173
Grant No.
(N/A)
Project No.
CA-B-AEC-6825-H
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Oct 1, 2010
Project End Date
Sep 30, 2015
Grant Year
(N/A)
Project Director
Wright, B.
Recipient Organization
UNIV OF CALIFORNIA
(N/A)
BERKELEY,CA 94720
Performing Department
Agricultural and Resource Economics, Berkeley
Non Technical Summary
The research proposed in this project addresses questions of stabilization of prices and income that are directly relevant to policies designed to reduce adverse impacts of market volatility on producers and consumers, and also addresses the detection of anticompetitive behavior that might adversely affect the welfare of farmers or consumers. Recent high volatility in commodity prices has led to renewed interest in the effects of speculation and storage on market stability and consumer welfare. New threats including climate change and mandates for biofuels production have led many to expect that market volatility will evidence, and in assessing policy responses, it is crucial to have a clear grasp of the implications of the dynamic behavior of commodity trade and storage for price volatility and price behavior more generally. We are now in a position to obtain more reliable estimates of the probability of occurrence of stock-outs, information that may be crucial to choice between different strategies to ensure minimal levels of consumption. Persistent long run trends in grain prices have been studied as evidence of returns to research, but have never been properly integrated into the time series analysis of price volatility, despite the obvious importance of long run supply in countering the prediction of Malthus and preventing shortages and famines. As ongoing discussions of recent wild swings in the prices of agricultural commodities have confirmed, there is great controversy and confusion regarding the nature and causes of commodity price behavior. Despite over a half century of study, the economics of commodity price movements have not been firmly established. One reason for this is that the theoretical models that have been developed to explain commodity market behavior have not been satisfactorily tested. Data time series are generally short, and the observations of consumption, production and stocks are typically unreliable. Furthermore the estimation procedures for the dynamic stochastic model are difficult to develop and implement. A major aspect of this project is to continue progress on the theory and empirical analysis of the behavior of markets for storable commodities. Recent empirical tests of many price series yield results that appear to be in conflict with the most accepted theory of competitive storage behavior. A related issue, vital to analysis of management of commodity-related risks, is to be able to test whether commodity markets are subject to irrational price bubbles that would justify public intervention. Better tests of dynamic market behavior can also help us be more certain about the detection of anticompetitive behavior in commodity markets, a concern that is becoming of increasing importance to farmers in the United States as concentration in the agricultural input industries has increased rapidly. Another related issue is the effect of crop insurance on market stability and producer welfare.
Animal Health Component
50%
Research Effort Categories
Basic
50%
Applied
50%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6036299301050%
6096299301050%
Goals / Objectives
1. Estimate the market for a storable agricultural commodity using a maximum likelihood approach. To our knowledge, this has not been achieved in the context of a dynamic stochastic market model with the possibility of stockouts. 2. Estimate a model of the market for agricultural commodities such as the major grains and sugar. 3. Develop a theoretical model for a market for a storable commodity allowing for both the trend in the market price evident for most commodities, and also the random nature of fluctuations in excess supply. 4. Implement an empirical application of the above trend model for a major storable agricultural commodity. 5. Explore the properties of an alternative, robust estimator of the price above which discretionary storage is zero, assuming no particular specification of distribution of the stochastic disturbance. 6. Explore further the theoretical underpinnings of current dynamic models of storage. 7. Explore the possibility of multimarket estimation in studying the integration of markets for major grains. 8. Consider the relation between measures to improve food security and the spatial distribution of production and consumption, storage facilities and transport systems, in the context of the needs of a country in which food supply is subject to disruption of access to the world market. 9. Consider the implications of the interactions of storage and trade for the evaluation of proposals to establish national or regional emergency grain reserves to improve food security for vulnerable nations. 10. Relate the analytic and empirical results to pressing problems such as adequate food supply and the need to regulate futures and options markets.
Project Methods
1. Assess the small sample properties of the maximum likelihood estimator using Monte Carlo simulation, and compare the results with those of the pseudo maximum likelihood model used in previous work. 2. Collect and verify the relevant price data available from various sources (USDA, FAO, Worl bank), and choose the appropriate deflator. Estimate the model using custom-coded MATLAB routines to numerically maximize the likelihood function. 3. Integrate a linear or logarithmic price trend in the storage model in a way that allows joint estimation of the trend and the parameters of the consumer demand and storage cost functions. 4. Apply the above trend model in estimation of the market for a storage model. 5. Study the small sample properties of Generalized Method of Moment estimators in identifying the cutoff price above which discretionary storage goes to zero, a crucial aspect of the storage model. 6. Continue to pursue theoretical development of the storage model. 7. Apply GMM methods in multimarket estimation of cutoff prices and interest rates for storage. 8. Based on a foundation laid by Brennan (1994) and Brennan et al. (1997), and using technical and economic information furnished via World Bank sources, construct a stylized numerical model representing the problem of ensuring adequate and timely delivery of grain during periods of scarcity of local supply in a landlocked country such as observed in Africa. 9. Elaborate a model of storage and trade based on Chapter 9 of Williams and Wright (1991) to recognize the reality of possible trade disruptions during price spikes, and derive the possible implications for location of stocks. 10. As in the past project, respond with policy-oriented papers addressing the proposals to regulate various aspects of commodity markets that are likely to arise during periods of high volatility.

Progress 01/01/12 to 12/31/12

Outputs
OUTPUTS: With postdoc Di Zeng and Chilean colleagues Eugenio and Juan Bobenrieth we applied our model of a market with a storable consumption commodity with trend to the question of the merits of the increase in the accuracy of data on global cereal stocks, recommended by the AMIS group supported by the G-20. We presented our work at the meeting of the AMIS group in Rome at tWith postdoc Di Zeng and Chilean colleagues Eugenio and Juan Bobenrieth we applied our model of a market with a storable consumption commodity with trend to the question of the merits of the increase in the accuracy of data on global cereal stocks, recommended by the AMIS group supported by the G-20. We presented our work at the meeting of the AMIS group in Rome at the FAO and it was well received. I presented on agricultural price volatility and related matters at the American Agricultural and Applied Economics Association in Seattle, at the East-West Center in Hawaii, and the International Association of Agricultural Economics in Brazil. I also co-organized a National Bureau of Economic Research conference in Seattle and with Eugenio Bobenrieth presented a paper on price bubbles in agricultural commodity markets. I also made a television interview on agricultural price volatility.he FAO and it was well received. I presented on agricultural price volatility and related matters at the American Agricultural and Applied Economics Association in Seattle, at the East-West Center in Hawaii, and the International Association of Agricultural Economics in Brazil. I also co-organized a National Bureau of Economic Research conference in Seattle and with Eugenio Bobenrieth presented a paper on price bubbles in agricultural commodity markets. I also made a television interview on agricultural price volatility. PARTICIPANTS: Postdoctoral Fellow Di Zeng worked on this project, with Xie Yang, graduate student. TARGET AUDIENCES: Target audiences included fellow agricultural economists at the annual AAEA meetings, AMIS executives, interested students, and leaders in international food market reform. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
The recurrence of spikes in prices of grains in 2012 led to demands that helped us to progress on several dimensions. First, we estimated, using Maximum Likelihood, a model of the market for a synthetic commodity, grain calories from the three major food grains, using current calorie weights for quantities, and a price constructed as a weighted average of the global price of each grain. This aggregate performs well, confirming the high substitutability of the calories from each of the grains at the margin. Second, with the support of the AMIS initiative of the G-20 we estimated the empirical model with trend using only price data, and a constructed price index of aggregate calories. We then reconstructed the implied variation in stocks, added estimates for essential stocks, and calibrated for range of variation. The results were remarkably consistent (given the noise in the data) with observed aggregate grain stocks, confirming high inter-grain substitution. We further investigated whether stocks data added extra information not in price data useful in detecting times of vulnerability to spikes in prices. Our results support the AMIS objective; stocks data do appear to help predict the largest spikes. We are now equipped to address empirically the effects of exogenous demands for grains for ethanol production on commodity markets.

Publications

  • Bobenrieth,Eugenio S.A., J.R.A. Bobenrieth and B.D. Wright 2012."Strict Concavity of the Value Function for a Family of Dynamic Accumulation Models."The B.E. Journal of Theoretical Economics, Vol. 12, No. 1. Wright, Brian D. 2012. "International Grains Reserves, and other instruments to address volatility in Grain Markets."The World Bank Research Observer. doi: 10.1093/wbro/lkr016.


Progress 01/01/11 to 12/31/11

Outputs
OUTPUTS: With colleagues Juan and Eugenio Bobenrieth and student Di Zeng we developed a method of estimated storage models including a time trend, and this method is being tested in application to specific markets. We also completed a key theoretical result that market demand is strictly downward sloped in these markets. Interest in application of the model to the phenomenon of large price swings in commodity markets led to numerous presentations including at the World Bank Executive Directors Meeting, GTAP annual meeting in Venice, Italy, World Food Program, New York, FARMDOC Zurich, IPC, Sao Paulo Brazil, and Chatham House, London. Wright made lead contributions to the AMIS Meeting at FAO, Rome, to develop early indicators of episodes of food market instability, as well as the IATRC Meeting, St, Petersburg, FAL, and the Commodity Futures Trading Commission, Washington DC. PARTICIPANTS: Juan Bobenrieth University of Bio-Bio, Concepcion, Chile; Eugenio Bobenrieth, Catholic University, Santiago, Chile; Di Zeng, Graduate Student, UC Berkeley; Yang Xie, graduate student, UC Berkeley. TARGET AUDIENCES: Audiences include agricultural economists worldwide, policy makers and food price analysts at FAO, World Bank, USDA, and farmer organizations, market modelers, commodity traders and farmers. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The modeling work is influencing the approach to price analysis in the FAO, the World Bank, and is having an effect on thinking about policy in the agricultural economics community in the United States and internationally. It is also putting claims of the role of speculation in appropriate perspective. It is also relating developments in biofuels incentives and mandates to effects on food and feed markets.

Publications

  • Wright, Brian D. "The Economics of Grain Price Volatility." Applied Economic Perspectives and Policy (2011) volume 33, number 1, pp. 32-58.


Progress 01/01/10 to 12/31/10

Outputs
OUTPUTS: With colleagues Juan and Eugenio Bobenrieth and Carlo Cafiero we completed development of a new method using maximum likelihood to estimate the commodity market model with storage, and tested its properties. We then applied it to the global sugar market. We also proposed diversion options for biofuels feedstock grains to protect vulnerable consumers in food supply emergencies. Wright gave presentations on the issues of price volatility of grains and the effects of biofuels, in IIASA, Austria, at an IPC conference in Barcelona, Spain, in Sao Paulo, Brazil, at the Berkeley Bioeconomy Conference, April 29 2010, and at the Agriculture for Development Conference, World Bank and UC Berkeley, Berkeley, September 24, 2010. With Di Zeng we pursued a simpler, general method of moments estimate of the price at which stocks of grain go to zero and a price spike is likely to occur. With Don Larson of the World Bank Wright and Cafiero developed a study of African grain markets relevant for decisions in food market crises. With Cafiero, Wright studied the particular challenges of countries in the Middle East and North Africa with respect to food security. PARTICIPANTS: Participants include Carlo Cafiero, University of Naples, Portici, Italy, Eugenio Bobenrieth, University of Concepcion, Chile, Juan Bobenrieth,Uniovarsity of Concepcion, Chile, Di Zeng, UC Berkeley TARGET AUDIENCES: Target audiences include international trade leaders, commodity market leaders, international economists, agricultural trade leaders, policy makers nationally and internationally, commodity market economists and analysts. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
The work on biofuels and food prices has shown decision makers that the recent food price movements are not unusual and can be explained by economically rational behavior. These conclusions helped prevent international adoption of buffer stock stabilization schemes urged by influential advocates in Europe and the United States. It also increased attention paid to the effect of biofuels subsidies in making markets susceptible to otherwise unimportant shocks to supply. The sugar market estimates show why sugar price is vulnerable to stocks when price is high - the market price sensitivity to shocks jumps when stocks run out.

Publications

  • Cafiero, C. and B.D. Wright. 2011. "Grain reserves and food security in the Middle East and North Africa." Food Security, ed. A. Varadachary,Vol. 3 (Suppl. 1): S61-S76, Springer: DOI 10.1007/s12571-010-0094-z.


Progress 01/01/09 to 12/31/09

Outputs
OUTPUTS: We worked on development of maximum likelihood estimation of the commodity storage model as an alternative to the pseudo-maximum likelihood approach.We also studied the problem of highly volatile grain prices that became evident in 2008, and applied the insights of the storage model to this issue. This work was presented by invitation, supported by the European Bank for Reconstruction and Development, the World Bank, and the Food and Agriculture Organization of the United Nations (FAO), at the World Grain Forum in St Petersburg, Russia, June 7, 2009. An invited lecture on this general topic was presented at the FAO in June, and on October 26 at the World Bank. A presentation on physical grain reserves for food security was given at the Financial Innovations Lab of the Milken Institute. A presentation on market mechanisms to deal with risk was made at the Gates Foundation, February 18, 2009. An invited presentation on the Food Price Crisis of 2007/08 was given at a joint intergovernmental conference in Santiago, Chile, sponsored by the FAO, November 5, 2009. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The presentations in Russia and Chile helped inform a range of market participants regarding the nature of recent grain market volatility, and its relation to stocks, drought and biofuels mandates. They also were influential in persuading developing and developed countries, and the FAO, the Milken Institute and the World Bank. of the folly of repeating the misguided interventions akin to those advocated by the New Economic Order of UNCTAD in the 1970s. The work on maximum likelihood moved empirical research methods forward but raised new questions to be addressed in future work.The work advanced the progress of work on food security and biofuels undertaken with the Energy Biosciences Institute at Berkeley by clarifying the relation of biofuels mandates to the recent volatility of grain prices.

Publications

  • Carlo Cafiero, Eugenio S.A. Bobenrieth H., Juan R.A. Bobenrieth H. and Brian D.Wright, "Theoretical advances in the modeling of storage and speculation" in Sarris, A. and Hallam, D. (eds.) Agricultural Commodity Markets and Trade. New Approaches to Analyzing Market Structure and Instability. FAO - Edward Elgar, 2006, pp. 115-133.
  • Carlo Cafiero, Eugenio S.A. Bobenrieth H., Juan R.A. Bobenrieth H. and Brian D. Wright (2009) "The empirical relevance of the competitive storage model." Journal of Econometrics, doi:10.1016/j.jeconom.2009.10.008
  • Carlo Cafiero and Brian D. Wright, "Is the storage model a `closed' empirical issue The empirical ability of the storage model to explain price dynamics". In Sarris, A. and Hallam, D. (eds.) Agricultural Commodity Markets and Trade. New Approaches to Analyzing Market Structure and Instability. FAO - Edward Elgar, 2006, pp.89-114.
  • "The Food Price Crisis of 2007/08: Evidence and Implications." World Food Outlook. FAO, December 2009. http://FAO.org/docrep/012/ak341e/ak341e13/html (last accessed April 1, 2010)


Progress 01/01/08 to 12/31/08

Outputs
OUTPUTS: We completed a study on estimation of commodity storage models using the pseudo-maximum likelihood approach. This study overturns previous work by Deaton and Laroque who concluded that such an empirical model was rejected by the empirical data. We also worked on development of a new, maximum likelihood approach to estimation of these types of models. We also collected more high frequency data on commodity prices. At the request of the United Nations Food and Agriculture Organization, we addressed the specific problem of high grain prices during 2008 and the effects of biofuels demand, and attended an FAO conference on this issue. PARTICIPANTS: Graduate students Fei Han and Di Zeng worked on this project. TARGET AUDIENCES: Target audiences include national and international policy makers, researchers on commodity markets, and farmers and traders. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
This work has put the estimation of commodity market models including storage back on track, and set the foundation for more empirical work. Our work on commodity price analysis attracted great interest. Apart from the FAO collaboration mentioned above, Wright gave seminars on this topic to a Colloquium with farm industry members at Kearney, CA, at a meeting of the UC President's Advisory Commission, and at a special Giannini Foundation conference on the food crisis. Wright was also interviewed by local television on this topic. Our work has also formed a foundation for work on stability of food markets in the presence of biofuels in collaboration with the UC Energy Biosciences Institute.

Publications

  • Bobenrieth, Eugenio S.A., Juan R.A. Bobenrieth and Brian D. Wright 2008. "A Foundation for the Solution of Consumption-Saving Behavior with a Borrowing Constraint and Unbounded Marginal Utility." Journal of Economic Dynamics and Control 32, 695-708.
  • Wright, Brian D. 2008. "Speculators, Storage and the Price of Rice." ARE Update 12 No.2, November/December, Giannini Foundation, University of California, 2008


Progress 01/01/07 to 12/31/07

Outputs
OUTPUTS: We revised a study on estimation of the commodity storage model and established the feasibility of such an estimation approach despite previous publications with the opposite conclusion. Wright worked on insurance problems for cases where the possible loss has no bound, such as cataclysmic events, and for cases where indemninification of losses is uncertain. We collected new commodity price data at monthly frequencies and seflator data for further estimation of storage behavior. PARTICIPANTS: Cai Jing, graduate student. Han Fei, graduate student. TARGET AUDIENCES: Policy makers regarding insurance of natural disasters and agricultural production, and market stabilization. Academics and others concerned with numerical and econometric approaches to modeling storage behavior and insurance arrangements.

Impacts
We now have an algorithm for estimation of storage behavior where price is unbounded. We also were approached by the California Earthquake Authority for assistance with reinsurance policy related to work on this project, and Wright's ex-student Ramezami was engaged in this effort.

Publications

  • Mahul, Olivier, and Brian D. Wright. 20007. Optimal Coverage for Incompletely Reliable Insurance. Economics Letters.


Progress 01/01/06 to 12/31/06

Outputs
We made great progress on several fronts. First we completed a study with Eugenio and Juan Bobenrieth and Carlo Cafiero on the estimation of commodity storage model, showing that previously negative results of others regarding the reproduction of empirically observed correlations were largely due to lack of numerical accuracy of the procedures used in the estimation process. We also prepared a study providing a new approach to estimating storage behavior in a stationary model in which price has no mean, and implemented a numerical example by developing a suitable algorithm. Work with Mahul on insurance of uncertain catastrophic events such as severe weather events also progressed well.

Impacts
Our work is re-establishing the empirical relevance of the rational storage model for agricultural commodities, and showing how uncertain large events can be optimally insured.

Publications

  • No publications reported this period


Progress 01/01/05 to 12/31/05

Outputs
Two major papers were prepared in collaboration with Phil Pardey of U. Minnesota on the evolving rights to intellectual property protection in the agricultural biosciences and on the implications of changing intellectual property regimes for developing country agriculture. These arose out of a conference at Harvard University hosted by Calestous Juma, January 21-22, 2005. With Philip G. Pardey of U. Minn., Carol Nottenburg, patent attorney formerly of CAMBIA, Australia, and and Bonwoo Koo of IFPRI, I prepared a paper on investment in and incentives for agricultural innovation for Volume 3 of the Handbook of Agricultural Economics. All these outputs are to be published beyond the reporting period. I also was a member (representing agricultural perspective) of National Academies' Committee on Intellectual Property Rights in Genomics and Protein Research and Innovation. The report will be published in 2006. With Zhen Lei of Berkeley and and Rakhia Juneja of the University of Arizona, I Wright conducted a survey at four land grant colleges regarding effects of intellectual property protection on academic agricultural biologists. I presented a keynote address on intellectual property protection in agricultural biotechnology at the GE3LS conference held by Genome Canada in March 13-15, 2005.

Impacts
This work will develop the theory and empirical estimation of commodity market behavior, and market means of handling risk, making agricultural policy formation potentially more precise and prediction more scientific.

Publications

  • Wright, B, Sil, J. 2005. `Risk in U.S. Agriculture: Insurance, Forward Contracts,Adverse Selection and Moral Hazard.' University of California, Berkeley.


Progress 01/01/04 to 12/31/04

Outputs
Great progress was made on a paper on estimation of price behavior of 12 major commodities; this paper will be completed in Spring 2005. Preliminary results, extensions of Cafiero's dissertation, were included in a paper for a book to be published by the FAO. Further theoretical work on extension of the model to include free disposal has been finished. The results confirm the relevance of this model for explaining observed price correlation, in contrast to recent prominent papers. This paves the way for further work addressing the appropriate price data and observation frequencies for estimating storage behavior. Another paper presents a method of approximating arbitrarily exactly the storage demand in a model in which consumer price is unbounded. (An earlier paper, Bobenrieth, Bobenrieth and Wright 2002, established stationarity in such a model.) A third paper addresses dynamic price behavior in such a model where discounted price is a martingale, and establishes a result that convergence of discounted price to a given neighborhood of zero with given probability occurs within a given finite horizon, independent of the current (unbounded) price.

Impacts
Two papers with co-authors are included in a major FAO Commodities Division volume on market stabilization, in preparation. The work on dynamic price behavior was presented as the annual D. Gale Johnson Lecture at the University of Chicago Economics Department. Related work on insurance (Mahul and Wright AJAE 2003) was presented at an international conference on handling risk in agriculture in Capri, Italy, and an invitation was received to participate in a World Bank conference on market stabilization in Spring 2005. Collaboration on risk analysis was initiated in response to an invitation from the World Bank.

Publications

  • Mahul, O. and Wright, B.D. 2004. Implications of Incomplete Performance for Optimal Insurance, Economica, Vol. 71 (November): 661-670.
  • Bobenrieth, E.S.A., Bobenrieth, J.R.A. and Wright, B.D. 2004. A Model of Supply of Storage. Economic Development and Cultural Change. 52(3): 605-616.
  • Mahul, O. and Wright, B.D. 2003. Designing Optimal Crop Revenue Insurance. American Journal of Agricultural Economics. 85(3): 580-589.


Progress 01/01/03 to 12/31/03

Outputs
Work on analysis of price behavior in the general model continued. A paper on microeconomic foundations of the frequent observation of positive stocks when grain prices are expected to fall, attributed to a convenience yield, was completed and accepted for publication. Great progress was made in another paper on dynamic price behavior and expectations, and further papers are at earlier stages of preparation. Another paper, Some Recent Models of Commodity Storage and Their Empirical Implications, with the Bobenrieth brothers was presented by Wright. This will be included in a future FAO (United Nations Food and Agriculture Organization) publication. Related work with Mahul on handling price and output risk in agricultural commodity production proceeded, with one publication in the period and another forthcoming.

Impacts
The importance of this work is recognized in the invited paper at the FAO conference. The paper on convenience yield was a feature of the University of Chicago Economics Department Memorial Conference, attended by industry participants as well as most department members, the eminent agricultural economist, D. Gale Johnson, where Wright was perhaps the only presenter who was never a student or colleague of Johnson. It has also resulted in an invitation to present the next D. Gale Johnson Lecture at the next D. Gale Johnson Lecture at the University of Chicago Economics Department, and an invitation to an international conference on handling risk in agriculture in Italy later this year. Finally, a collaboration with a division of the World Bank on risk management has been initiated.

Publications

  • Mahul, Olivier and Brian D. Wright. 2003. Implications of Incomplete Performance for Optimal Insurance. Economica, In Press.


Progress 01/01/02 to 12/31/02

Outputs
Progress was made with a graduate student on two papers involving storage. In one there is a finite resource that, with exploration, can yield discoveries storable until consumed. We are studying the empirical relation of this process to the standard processes assumed for finite resources and agricultural commodities. In the other, the production process is stochastic, and includes innovation proportional to stocks. We are examining the implications of the model for commodity market analysis. We also pursued analysis of short and longer-run price behavior in the stationary commodity model with possibly infinite long run mean.

Impacts
This work will help us understand the implications of changes in reserves of commodities like oil for the expected timing of exhaustion of exhaustible resources, and offers insights contrasting with the current "received wisdom" that higher reserves mean resources are still plentiful. It will also help us understand serial correlation in prices of commodities, and tests of the finite resource model in the case where exploration is stochastic.

Publications

  • Bobenrieth, Eugenio S.A., Juan R.A. Bobenrieth and Brian D. Wright. 2002. A Commodity Price Process with a Unique Continuous Invariant Distribution Having Infinite Mean. Econometrica, 70(3): 1213-1219.
  • Pardey, Philip G. and Brian D. Wright. 2002. Agricultural R & D, Productivity and Global Food Prospects. In Plants, Genes and Agriculture, Second Edition. Edited by M. Chrispeels and D. Sadava. Chapter 2.


Progress 01/01/01 to 12/31/01

Outputs
In this project we continued work with Eugenio Bobenrieth on explaining the apparent empirical contrasts between commodity price behavoir at short and long frequencies. This work draws on the implications of a new model co-authored with Eugenio and Juan Bobenrieth, and has led to a collection of econometric implications that are to be incorporated in a new methodological paper. Work on estimation of the storage model, with graduate advisee, Carlo Cafiero, continues.

Impacts
This work should help us understand "mean reversion" on the one hand and "speculative runs" on the other, from a whole new perspective.

Publications

  • Wright, Brian. 2001. "Storage and Price Stabilization." In Handbook of Agricultural Economics. Ed. by B. Gardner and G. Rausser. Johns Hopkins University, In Press. Ch. 14:817-861.


Progress 10/01/00 to 12/31/00

Outputs
No progress to report.

Impacts
(N/A)

Publications

  • No publications reported this period