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Agricultural liberalization policy and commodity price volatility: a GARCH application

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  • Jian Yang
  • Michael Haigh
  • David Leatham

Abstract

This study examines the effect of the recent radical agricultural liberalization policy, i.e. the 1996 FAIR Act, on agricultural commodity price volatility using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models. Results of the study indicate that the agricultural liberalization policy has caused an increase in the price volatility for three major grain commodities (corn, soybeans and wheat) and little change for oats, but a decrease for cotton. These findings stand in sharp contrast to Crain and Lee's observations in 1996 based on wheat markets that market-oriented measures in government farm policies tend to reduce agricultural price volatility.

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  • Jian Yang & Michael Haigh & David Leatham, 2001. "Agricultural liberalization policy and commodity price volatility: a GARCH application," Applied Economics Letters, Taylor & Francis Journals, vol. 8(9), pages 593-598.
  • Handle: RePEc:taf:apeclt:v:8:y:2001:i:9:p:593-598
    DOI: 10.1080/13504850010018734
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    Cited by:

    1. Maitre d'Hotel, Elodie & le Cotty, Tristan & Jayne, Thomas S., 2012. "Is A Public Regulation Of Food Price Volatility Feasible In Africa? An Arch Approach In Kenya," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122551, European Association of Agricultural Economists.
    2. Chan, Kam C. & Fung, Hung-Gay & Leung, Wai K., 2004. "Daily volatility behavior in Chinese futures markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(5), pages 491-505, December.
    3. Antonios Antypas & Phoebe Koundouri & Nikolaos Kourogenis, "undated". "Volatility Trends and Optimal Portfolios: the Case of Agricultural Commodities," DEOS Working Papers 1113, Athens University of Economics and Business.
    4. Ramaprasad Bhar & Shigeyuki Hamori, 2006. "Component structures of agricultural commodity futures traded on the Tokyo Grain Exchange," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 13(1), pages 1-9, March.
    5. Cong, Ren & Lo, Alex Y., 2017. "Emission trading and carbon market performance in Shenzhen, China," Applied Energy, Elsevier, vol. 193(C), pages 414-425.
    6. Kilima, Fredy & Chung, Chanjin & Kenkel, Philip L. & Mbiha, Emanuel, 2004. "The Impact Of Market Reforms On Spatial Volatility Of Maize Price In Tanzania," 2004 Annual meeting, August 1-4, Denver, CO 20332, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Anthony N. Rezitis & Konstantinos S. Stavropoulos, 2010. "Supply response and price volatility in the Greek broiler market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 25-48.

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