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Booms and Busts in Chinese Agricultural Markets: An Agent‐Based Model

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  • Yu Zhang
  • Xinyi Deng

Abstract

This paper uses agent‐based modelling to study the frequent booms and busts in Chinese agricultural markets. First, an artificial agricultural commodity market consisting of heterogeneous agents, such as producers, consumers, and speculators, is built. A numerical simulation suggests that speculation can cause large price fluctuations via nonlinear price dynamics. Then, parameters are estimated by the simulated method of moments using garlic and ginger price data in China from 2006Q2 to 2018Q3. The estimation yields a statistically significant speculative behavior parameter, supporting speculators’ existence. Based on the well‐estimated model, a low‐cost policy experiment aiming at market stabilization is carried out. The essence of this policy is to release the theoretical steady state of the estimated model as the government‐guided price to producers. The guided price, even partially followed by producers, can reduce simulated price variances and weaken speculators’ negative impact on market stability. Robustness tests show that the effect of policy experiment is robust under a 20% change in any parameter value or a 5% change in the guided price.

Suggested Citation

  • Yu Zhang & Xinyi Deng, 2022. "Booms and Busts in Chinese Agricultural Markets: An Agent‐Based Model," Complexity, John Wiley & Sons, vol. 2022(1).
    • Handle: RePEc:wly:complx:v:2022:y:2022:i:1:n:4869762
    DOI: 10.1155/2022/4869762
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