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An Econometric Evaluation Of Stabilization Policies For The U.S. Grain Market

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  • Arzac, Enrique R.

Abstract

This paper evaluates stabilization policies by applying methods of stochastic control and dynamic analysis to an econometric model of the U.S. grain market. Its main results are: (1) the aggregate consumer and producer surplus generated by the model is insensitive to the choice of the market regime; (2) policies directed to stabilize prices at levels compatible with nondecreasing farm revenue require the management of both grain inventories and domestic supply; (3) price fluctuations are significantly less under optimal stabilization than in the unregulated version of the model; and (4) historical policies have destabilizing effects on the market model.

Suggested Citation

  • Arzac, Enrique R., 1979. "An Econometric Evaluation Of Stabilization Policies For The U.S. Grain Market," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 4(1), pages 1-14, July.
    • Handle: RePEc:ags:wjagec:32430
    DOI: 10.22004/ag.econ.32430
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    References listed on IDEAS

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    1. Gordon C. Rausser, 1978. "Active Learning, Control Theory, and Agricultural Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(3), pages 476-490.
    2. Fair, Ray C, 1970. "The Estimation of Simultaneous Equation Models with Lagged Endogenous Variables and First Order Serially Correlated Errors," Econometrica, Econometric Society, vol. 38(3), pages 507-516, May.
    3. Tweeten, Luther G., 1967. "The Demand for United States Farm Output," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 7(3), pages 1-28.
    4. J. P. Houck & M. E. Ryan, 1972. "Supply Analysis for Corn in the United States: The Impact of Changing Government Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 54(2), pages 184-191.
    5. Alvin C. Egbert, 1969. "An Aggregate Model of Agriculture—Empirical Estimates and Some Policy Implications," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 51(1), pages 71-86.
    6. Compiled by: & Eaton, David J. & Steele, W. Scott, 1976. "Analyses of Grain Reserves, A Proceedings," Miscellaneous Publications 329855, United States Department of Agriculture, Economic Research Service.
    7. Houck, James P. & Ryan, Mary E., 1972. "Supply Analysis For Corn In The United States: The Impact Of Changing Government Programs," Staff Papers 13554, University of Minnesota, Department of Applied Economics.
    8. Paul A. Samuelson, 1972. "The Consumer Does Benefit from Feasible Price Stability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(3), pages 476-493.
    9. Gustafson, Robert L., 1958. "Carryover levels for grains: A method for determining amounts that are optimal under specified conditions," Technical Bulletins 157231, United States Department of Agriculture, Economic Research Service.
    10. Arzac, Enrique R. & Wilkinson, Maurice, 1979. "Stabilization policies for united states feed grain and livestock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 1(1), pages 39-58, February.
    11. Ryan, Mary E. & Abel, Martin E., 1972. "Corn Acreage Response and the Set-Aside Program," Journal of Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, vol. 24(4), pages 1-14, October.
    12. Turnovsky, Stephen J, 1976. "The Distribution of Welfare Gains from Price Stabilization: The Case of Multiplicative Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 133-148, February.
    13. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    14. Gordon C. Rausser & John W. Freebairn, 1974. "Approximate Adaptive Control Solutions to US Beef Trade Policy," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 1, pages 177-203, National Bureau of Economic Research, Inc.
    15. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
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    Cited by:

    1. Athanasiou, George & Karafyllis, Iasson & Kotsios, Stelios, 2008. "Price stabilization using buffer stocks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1212-1235, April.
    2. Ospina, Enrique & Shumway, Richard, 1980. "Impact Of Corn Prices On Beef Product Mix And Prices," 1980 Annual Meeting, July 27-30, Urbana-Champaign, Illinois 278917, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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