U.S. Farm Policy and the Volatility of Commodity Prices and Farm Revenue
A dynamic three-commodity rational-expectations storage model is used to compare the impact of the Federal Agricultural Improvement and Reform (FAIR) Act of 1996 with a free-market policy, and with pre-FAIR policies. Results suggest that FAIR did not lead to significant increases in long-run price volatility or revenue volatility. The main impact of pre-FAIR, relative to the free-market regime, was to substitute government storage for private storage in a way that did little to support prices or to stabilize farm incomes. Results also indicate that U.S. grain market volatility in 1995ï¾–2000 was due to fundamental market forces and not to FAIR.
|Date of creation:||01 May 2002|
|Date of revision:|
|Publication status:||Published in American Journal of Agricultural Economics, May 2002, vol. 84 no. 2, pp. 335-351|
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