THE INTERACTION OF WORKING AND SPECULATIVE COMMODITY STOCKS

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.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/31931
Total Pages:
28
Series Statement:
Discussion Paper Number 03.2005




 Record created 2017-04-01, last modified 2017-04-04

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