Work

Bounded Price Variation and Rational Expectations in Endogenous Switching Model of the U.S. Corn Market

Year: 1989

Type: article

Abstract: A model that includes bounded price variation and rational expectations by producers is estimated for the U.S. corn market. The resulting model specification is highly nonlinear though, since the probability of market equilibrium must be determined endogenously. Unlike previous research, the cross-equation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using Fair and Taylor's (1983) procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models. The resulting model is compared against a standard equilibrium model with naive expectations. The results show the bounded prices model is a superior specification. Copyright 1989 by MIT Press.

Source: The Review of Economics and Statistics

DOI: 10.2307/1928102

Authors: Matthew T. Holt, Stanley R. Johnson

Language: English

Topic: Economics of Agriculture and Food Markets

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2016307748

FWCI: 9.642

Cites: 19

Cited by: 61

Related to: 10