Cost Pass‐Through in Commodity Markets With Capacity Constraints and International Linkages

Bibliographic Data

ID21653302
AuthorsReinhard Ellwanger (0000-0002-9521-3388, Bank of Canada Ottawa Canada), Hinnerk Gnutzmann (Institute for Macroeconomics Leibniz University Hannover Hannover Germany), Piotr Śpiewanowski (0000-0001-9812-4674, Institute of Economics Polish Academy of Sciences Warsaw Poland, corresponding author)
Year2025
Volume40
Issue2
Pages149-163
Publication date2025-03-01
Open AccessYes
TypeARTICLE
VenueJournal of Applied Econometrics (JOURNAL)
Journal identifiersISSN: 1099-1255 • E-ISSN: 0883-7252
PublisherWiley (PUBLISHER • GB)
DOI10.1002/jae.3098
OpenAlexW4405200569
LanguageEN
References cited35

We examine how regional cost shocks are passed through into the prices of globally traded energy‐intensive commodities. We find that the pass‐through of local costs is influenced by production capacity in the short run. When capacity constraints become binding, the pass‐through of cost shocks to the constrained region diminishes to zero. Our application to the market for ammonia, a commodity largely produced from natural gas, demonstrates the significance of capacity constraints and international market linkages for empirical pass‐through models

Commodity · Econometrics · Economics · Market economy · Microeconomics · Monetary economics · Natural resource economics · Global Energy and Sustainability Research · Market Dynamics and Volatility · Monetary Policy and Economic Impact

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