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The Overshooting Hypothesis of Agricultural Prices: The Role of Asset Substitutability

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Author Info

  • Lai, Ching-Chong
  • Hu, Shih-Wen
  • Fan, Chih-Ping

Abstract

By allowing for various degrees of asset substitutability between bonds and agricultural products, this paper reexamines the robustness of the overshooting hypothesis of agricultural product prices. It is found, in both a closed economy and an open economy, that the crucial factor determining whether agricultural prices overshoot or undershoot their long-run response following an expansion in the money stock depends upon the extent of asset substitutability between bonds and agricultural goods.

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File URL: http://purl.umn.edu/30784
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 30 (2005)
Issue (Month): 01 (April)
Pages:

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Handle: RePEc:ags:jlaare:30784

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Web page: http://waeaonline.org/
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Related research

Keywords: asset substitutability; commodity prices; overshooting; Demand and Price Analysis;

References

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  1. Rausser, Gordon C. & Chalfant, James A. & Love, H. Alan & Stamoulis, Kostas G., 1986. "Macroeconomic linkages, taxes, and subsidies in the U.S. agricultural sector," CUDARE Working Paper Series 393, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  2. Moutos, Thomas & Vines, David, 1988. "Output, Inflation and Commodity Prices," CEPR Discussion Papers 271, C.E.P.R. Discussion Papers.
  3. repec:cdl:agrebk:1131643 is not listed on IDEAS
  4. Michael T. Belongia, 1991. "Monetary policy and the farm/nonfarm price ratio: a comparison of effects," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 30-46.
  5. Alan G. Isaac & David E. Rapach, 1996. "Monetary Shocks and Real Farm Prices: A Re-Examination," Others 9602001, EconWPA.
  6. Stamoulis, Kostas G. & Rausser, Gordon C., 1987. "Overshooting of agricultural prices," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt83060269, Department of Agricultural & Resource Economics, UC Berkeley.
  7. Sayed H. Saghaian & Michael R. Reed & Mary A. Marchant, 2002. "Monetary Impacts and Overshooting of Agricultural Prices in an Open Economy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 90-103.
  8. Choe, Young Chan & Koo, Won W., 1993. "Monetary Impacts On Prices In The Short And Long Run: Further Results For The United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(02), December.
  9. Frankel, Jeffrey A & Hardouvelis, Gikas A, 1985. "Commodity Prices, Money Surprises and Fed Credibility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 17(4), pages 425-38, November.
  10. Bordo, Michael David, 1980. "The Effects of Monetary Change on Relative Commodity Prices and the Role of Long-Term Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1088-1109, December.
  11. Shih-wen Hu & Vey Wang, 1996. "Commodity Price Dynamics and Anticipated Shocks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 982-990.
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Citations

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Cited by:
  1. Chao, Chi-Chur & Hu, Shih-Wen & Tai, Meng-Yi & Wang, Vey, 2011. "Monetary policy announcements and stock price dynamics in a small open economy," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 520-531, October.
  2. Chen, Li-Ju & Ye, Chusheng & Hu, Shih-Wen & Wang, Vey & Wen, Jiandong, 2013. "The Effect of a Target Zone on the Stabilization of Agricultural Prices and Farmers' Nominal Income," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(1), April.

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