Incorporating commodity stockholding into a general equilibrium model of the global economy

Applied General Equilibrium (AGE) models are increasingly used for short-run commodity market analysis, although they are generally not designed for such purposes. This study remedies a key shortcoming of such work by incorporating a commodity stockholding model into a short-run global AGE model. An approach to calibrating and validating the model is demonstrated for the staple grains sector. Its historical weather-induced supply shocks form a natural vehicle for reconciling model outcomes with observed behavior. The stockholding model, in conjunction with a Gaussian Quadrature approach to characterizing supply-side uncertainty, will prove useful to researchers seeking to conduct short-run analysis of commodity market policy in an AGE context.