Estimation of the Contribution of Supply and Demand Factors to the Dynamics of Coal Prices in the Domestic Russian Market

Abstract

The purpose of the study. Identifying the contribution of factors to price dynamics is a difficult issue, however, at present, scientists and analysts from the field of macroeconomics have proposed some ways to solve it. Existing econometric methods often show results that are inconsistent with the views of analysts of a particular market. In this article, the authors test these techniques to analyze the dynamics of prices for coal in the domestic Russian market.Materials and methods. In this paper, we used the method for determining the contribution of factors to price dynamics based on a theoretical model of aggregate demand and aggregate supply and a statistical approach to identifying shocks through the residuals of vector autoregression models. We use Rosstat data as a source of statistical data on the price level and JSC “Russian Railways” data as a proxy data source on the level of consumption and the contribution of Russian regions. The calculation was performed by using the R programming language, using the RStudio development environment.Results. The calculations show that upward price changes were more often associated with positive demand shocks; however, there are periods where supply factors contributed more to price growth. Therefore, for a few months in early 2020, prices rose largely due to the contribution of supply factors, and in early 2022 due to the contribution of demand factors. During 2021, when prices in some markets increased by two or more times, both positive demand shocks and negative supply shocks affected the Russian market.Conclusion. The results obtained from the calculations are mixed; however, they do not contradict general economic logic and are combined with a prior view about the impact of supply and demand factors on the domestic coal market. In addition, considering the compactness of this approach in terms of calculations and necessary data, we can talk about the possibility of applying this approach to market analysis on a permanent basis.

Keywords

• price dynamics
• coal
• domestic market
• decomposition of the contribution of factors
• supply and demand
• vector autoregression