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Policy Implications Of Unit Root Nonstationarity In Multiproduct Acreage Response Systems

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  • Clark, J. Stephen
  • Spriggs, John

Abstract

This paper explores the theoretical and empirical issues in unit root non-stationarity for multiproduct acreage response systems. The policy implication of a unit root in a multivariate autoregressive time series like a system of acreage responses is very disturbing; it implies that even a one-shot government policy that influences acreage will have a permanent response associated with it. A wheat/barley acreage response system for the Prairie province region of Canada is estimated and the existence of a unit root cannot ~e rejected empirically. The response of the stationary system of acreage responses to a policy shock is shown to be radically different from the response of a non-stationary system of acreage responses even though the empirical estimates of the reduced form parameters are only marginally different between the two models.

Suggested Citation

  • Clark, J. Stephen & Spriggs, John, 1991. "Policy Implications Of Unit Root Nonstationarity In Multiproduct Acreage Response Systems," 1991 Annual Meeting, August 4-7, Manhattan, Kansas 271207, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea91:271207
    DOI: 10.22004/ag.econ.271207
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    References listed on IDEAS

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    1. J. Stephen Clark & Jonaly K. Siemens & Catherine S. Fleming, 1990. "Effects of Initial Payment Policy on the Welfare of Saskatchewan Wheat and Barley Producers," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 38(3), pages 385-404, November.
    2. Abebayehu Tegene & Wallace E. Huffman & John A. Miranowski, 1988. "Dynamic Corn Supply Functions: A Model with Explicit Optimization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 103-111.
    3. Marc Nerlove, 1956. "Estimates of the Elasticities of Supply of Selected Agricultural Commodities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 38(2), pages 496-509.
    4. Karl D. Meilke, 1976. "Acreage Response to Policy Variables in the Prairie Provinces," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(3), pages 572-577.
    5. Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
    6. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    7. Eckstein, Zvi, 1984. "A Rational Expectations Model of Agricultural Supply," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 1-19, February.
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