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A Multimarket Bounded Price Variation Model under Rational Expectations: Corn and Soybeans in the United States

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  • Matthew T. Holt

Abstract

The bounded prices model under rational expectations is extended to a multimarket setting. Because the resulting rational expectations model is highly nonlinear, Fair and Taylor's iterative procedure is employed in conjunction with the multimarket framework to obtain maximum likelihood estimates of a supply-demand model for corn and soybeans. The estimated model is then used to simulate the market equilibrium effects associated with removing price support and acreage set-aside programs over the sample period. Among other things, the results reveal that acreage set-asides have dominated the induced supply effects of price support programs for corn.

Suggested Citation

  • Matthew T. Holt, 1992. "A Multimarket Bounded Price Variation Model under Rational Expectations: Corn and Soybeans in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(1), pages 10-20.
    • Handle: RePEc:oup:ajagec:v:74:y:1992:i:1:p:10-20.
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    File URL: http://hdl.handle.net/10.2307/1242985
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    Cited by:

    1. Tomek, William G. & Myers, Robert J., 1993. "Empirical Analysis Of Agricultural Commodity Prices: A Viewpoint," Working Papers 6847, Cornell University, Department of Applied Economics and Management.
    2. Burton, Diana M. & Love, H. Alan, 1996. "A Review of Alternative Expectations Regimes in Commodity Markets: Specification, Estimation, and Hypothesis Testing Using Structural Models," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(2), pages 213-231, October.
    3. Holt, Matthew T., 1994. "Price-Band Stabilization Programs And Risk: An Application To The U.S. Corn Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-16, December.
    4. Baltezore, James F. & Leitch, Jay A. & Linz, George M., 1994. "The Economics of Cattail Management: Assessing the Trade-Offs," Agricultural Economics Reports 23147, North Dakota State University, Department of Agribusiness and Applied Economics.
    5. David Ubilava, 2012. "Modeling Nonlinearities in the U.S. Soybean‐to‐Corn Price Ratio: A Smooth Transition Autoregression Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 28(1), pages 29-41, January.
    6. Zhu, Yichen & Ghoshray, Atanu, 2021. "Climate Anomalies and Its Impact on U.S. Corn and Soybean Prices," 2021 Conference, August 17-31, 2021, Virtual 315271, International Association of Agricultural Economists.
    7. Chembezi, Duncan M. & Cacho, Joyce A., 1997. "Alternative Price Expectation Formulation and Information Access," 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada 35905, Western Agricultural Economics Association.
    8. Horan, Richard D. & Claassen, Roger & Cooper, Joseph C., 2000. "Environmental Risk And Agri-Environmental Policy Design," 2000 Annual meeting, July 30-August 2, Tampa, FL 21827, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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