Authors: Olga Bondarenko
Abstract: Agricultural commodity markets have experienced bouts of significant volatility in recent years, drawing the attention of policymakers all over the world. This paper studies the dynamics of wheat and corn prices since 1999 through the lens of standard BVAR models in the spirit of Kilian (2009) and Kilian and Murphy (2014). I use monthly revisions of the WASDE supply projections to overcome the problem of limited availability of high-frequency data and develop an indicator of aggregate demand for grains, following Baumeister et al. (2020). The estimated elasticities are generally consistent with theory and earlier studies and produce reasonable historical decompositions. Models are helpful in forecasting exercises, including conditional forecasts and alternative scenarios while they perform no better than the random walk in short-term unconditional forecasting.
Cite as: Bondarenko, O. (2023). Agricultural commodity price dynamics: Evidence from BVAR models. NBU Working Papers, 3/2023. Kyiv: National Bank of Ukraine. Retrieved from https://bank.gov.ua/admin_uploads/article/WP_2023-03_Bondarenko.pdf
