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Estimating the Competitive Storage Model with Stochastic Trends in Commodity Prices | | Kjartan Kloster Osmundsen
; Tore Selland Kleppe
; Roman Liesenfeld
; Atle Oglend
; | | Date: |
12 Jan 2020 | | Abstract: | We propose a state-space model (SSM) for commodity prices that combines the
competitive storage model with a stochastic trend. This approach fits into the
economic rationality of storage decisions, and adds to previous deterministic
trend specifications of the storage model. Parameters are estimated using a
particle Markov chain Monte Carlo procedure. Empirical application to four
commodity markets shows that the stochastic trend SSM is favored over
deterministic trend specifications. The stochastic trend SSM identifies
structural parameters that differ from those for deterministic trend
specifications. In particular, the estimated price elasticities of demand are
significantly larger under the stochastic trend SSM. | | Source: | arXiv, 2001.3984 | | Services: | Forum | Review | PDF | Favorites | |
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