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The Interaction Of Working And Speculative Commodity Stocks

Author

Listed:
  • Carter, Colin A.
  • Revoredo-Giha, Cesar

Abstract

This paper models the interaction of working (also called pipeline) and speculative commodity stocks. We model working inventories (i.e., raw material inventories carried by processors) based on Ramey's (1989) model of inventories as factors of production, which allows us to represent storage under inter-temporal price backwardation, observed in commodity markets. We incorporate both speculative and working stocks in a simple model to analyze the interaction and to simulate the relationship between inter-temporal commodity price spreads and stocks. Our model replicates common price patters found in commodity markets.

Suggested Citation

  • Carter, Colin A. & Revoredo-Giha, Cesar, 2005. "The Interaction Of Working And Speculative Commodity Stocks," Environmental Economy and Policy Research Discussion Papers 31931, University of Cambridge, Department of Land Economy.
  • Handle: RePEc:ags:ucamdp:31931
    DOI: 10.22004/ag.econ.31931
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    References listed on IDEAS

    as
    1. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 1-23.
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    4. Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-1022, July.
    5. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    6. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
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    Cited by:

    1. Cesar Revoredo, 2000. "On The Solution Of The Dynamic Rational Expectations Commodity Storage Model In The Presence Of Stockholding By Speculators And Processors," Computing in Economics and Finance 2000 42, Society for Computational Economics.

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