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Model closure and price formation under switching grain market regimes in South Africa

Author

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  • Meyer, Ferdinand H.
  • Westhoff, Patrick C.
  • Binfield, Julian C.R.
  • Kirsten, Johann F.

Abstract

This paper develops the structure and closure of an econometric regime-switching model within a partial equilibrium framework that has the ability to generate reliable estimates and projections of endogenous variables under market switching regimes. Models used in policy evaluation usually either ignore the possibility of regime switching using just a single method of price determination based on average effects, or incorporate highly stylised components that may not reflect the complexities of a particular market. This paper proposes an approach that the authors believe allows the incorporation of features of regime switching in a multisector commodity level model that capture salient features of the South African market and therefore are able to produce more reliable projections of the evolution of the sector under alternative shocks.

Suggested Citation

  • Meyer, Ferdinand H. & Westhoff, Patrick C. & Binfield, Julian C.R. & Kirsten, Johann F., 2006. "Model closure and price formation under switching grain market regimes in South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 45(4), December.
  • Handle: RePEc:ags:agreko:10139
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    References listed on IDEAS

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    1. Babcock, Bruce A. & Beghin, John C. & Fabiosa, Jacinto F. & de Cara, Stephane & Elobeid, Amani E. & Fang, Cheng & Fuller, Frank H. & Hart, Chad E. & Isik, Murat & Matthey, Holger & Saak, Alexander E. , 2002. "FAPRI 2002 World Agricultural Outlook," Staff Reports 32051, Food and Agricultural Policy Research Institute (FAPRI).
    2. Barrett, Christopher B., 1999. "The effects of real exchange rate depreciation on stochastic producer prices in low-income agriculture," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(3), May.
    3. Beghin, John C. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen P. & Tokgoz, Simla & Yu, Tun-Hsiang & Wailes, Eric J. & Chavez, Edward & Woma, 2007. "FAPRI 2007 U.S. And World Agricultural Outlook," Staff General Research Papers Archive 12805, Iowa State University, Department of Economics.
      • Beghin, John C. & Dong, Fengxia & Elobeid, Amani E. & Fabiosa, Jacinto F. & Fuller, Frank H. & Hart, Chad E. & Kovarik, Karen & Tokgoz, Simla & Yu, Tun-Hsiang (Edward) & Wailes, Eric J. & Chavez, Eddi, 2007. "FAPRI 2007 U.S. and World Agricultural Outlook," Staff Reports 7296, Food and Agricultural Policy Research Institute (FAPRI).
    4. Christopher B. Barrett, 2001. "Measuring Integration and Efficiency in International Agricultural Markets," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 19-32.
    5. Babcock, Bruce A. & Beghin, John C. & Mohanty, Samarendu & Fuller, Frank H. & Fabiosa, Jacinto F. & Kaus, Phillip J. & Fang, Cheng & Hart, Chad E. & Kovarik, Karen & Womack, Abner W. & Young, Robert E, 2000. "FAPRI 2000 World Agricultural Outlook," Staff Reports 32045, Food and Agricultural Policy Research Institute (FAPRI).
    6. repec:ias:cpaper:00-fsr2 is not listed on IDEAS
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    Cited by:

    1. Strauss, P.G. & Meyer, Ferdinand H. & Kirsten, Johann F., 2008. "Facilitating decision-making in agriculture by using a system of models," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(3), September.
    2. Abidoye, Babatunde O. & Marlene, Labuschagne, 2012. "The Transmission of World Maize Price to South African Maize Market: A Threshold Cointegration Approach," Working Papers 206515, University of Pretoria, Department of Agricultural Economics, Extension and Rural Development.
    3. repec:taf:ragrxx:v:56:y:2017:i:1:p:53-66 is not listed on IDEAS
    4. Reynolds, Sanri & Meyer, Ferdinand & Cutts, Michela & Vink, Nick, 2009. "Modeling Long-term Commodities: the Development of a Simulation Model for the South African Wine Industry within a Partial Equilibrium Framework," Journal of Wine Economics, Cambridge University Press, vol. 4(02), pages 201-218, December.
    5. McDonald, Scott & Punt, Cecilia & Rantho, Lillian & van Schoor, Melt, 2008. "Costs and benefits of higher tariffs on wheat imports to South Africa," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), March.
    6. Babatunde O. Abidoye & Marlene Labuschagne, 2014. "The transmission of world maize price to South African maize market: a threshold cointegration approach," Agricultural Economics, International Association of Agricultural Economists, vol. 45(4), pages 501-512, July.
    7. Gebrehiwet, Yemane & Meyer, Ferdinand H. & Kirsten, Johann F., 2010. "Integrating Agricultural Input Expenditure into a South African Agricultural Sector’s Partial Equilibrium Model," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 97050, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).

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    Keywords

    Crop Production/Industries; Marketing;

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