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

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Author Info
Holt, Matthew T
Johnson, Stanley R

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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.

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Publisher Info
Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 71 (1989)
Issue (Month): 4 (November)
Pages: 605-13
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Handle: RePEc:tpr:restat:v:71:y:1989:i:4:p:605-13

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  5. Peterson, Hikaru H. & Tomek, William G., 2003. "How Much Of Commodity Price Behavior Can A Rational Expectations Storage Model Explain?," Staff Papers 30712, Kansas State University, Department of Agricultural Economics. [Downloadable!]
  6. Ekboir, Javier & Jarvis, Lovell S. & Rey, Carlos, 1998. "Investment Effects Of Endogenous And Exogenous Depreciation: Improved Pastures In Uruguay," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20934, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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  9. Campos, M. Isabel & Herrera, Julio & Jimenez-Ridruejo, Zenon, 1999. "Censured Exchange Rates in a Discrete Time Target Zones Model: The Spanish Peseta/Deutsche Mark Case," ERSA conference papers ersa99pa183, European Regional Science Association. [Downloadable!]
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