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.
DOI: 10.2307/1928102
Authors: Matthew T. Holt, Stanley R. Johnson
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2016307748
