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Dairy supply response under stochastic trend and seasonality

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  • Murali Adhikari
  • Krishna Paudel
  • Jack Houstan
  • James Bukenya

Abstract

Developing a dairy supply model assuming deterministic trend and seasonality a priori could lead to model misspecification. A structural time series methodology was used to examine the role of stochastic trend and seasonality in a dairy supply response model using quarterly time series data. Four versions of a time-linked model of dairy supply response were compared. A dairy supply model with stochastic seasonality and deterministic trend performed the best, as evidenced by diagnostic tests, goodness-of-fit measures, and forecasting accuracy. Our analysis suggested against the classic approach of incorporating the deterministic seasonality component in dairy supply models.

Suggested Citation

  • Murali Adhikari & Krishna Paudel & Jack Houstan & James Bukenya, 2007. "Dairy supply response under stochastic trend and seasonality," Applied Economics Letters, Taylor & Francis Journals, vol. 14(12), pages 887-891.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:12:p:887-891
    DOI: 10.1080/13504850600689907
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    References listed on IDEAS

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