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Evaluation of Uncertainties Affecting Policy Decision of the 1988 Cotton Program

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  • Chen, Dean T.
  • Anderson, Carl G.

Abstract

Key uncertainties of the cotton industry, such as yield per acre, domestic mill consumption, and export sales, are evaluated using a microcomputer- based econometric model, AGGIES/Cotton (AGricultural Globally Integrated Econometric System), to generate a baseline forecast and alternative scenarios for the 1988/89 crop year. Various discretionary provisions of the 1988/89 cotton program are analyzed in relation to these simulation results. Effects of uncertainties are discussed with respect to alternative production and demand projections in relation to a carryover stock target of 4 million bales, as specified by the 1985 farm legislation and deviations from this target. An econometric model can best be utilized in the policy process for a baseline economic projection, impact simulation of alternative economic outcomes, and evaluation of policy response to uncertainties. The most useful model application to the cotton industry, under the existing program of marketing loan and the dynamic transitions in the world market, is to forecast major market trends and evaluate the areas of uncertainty for policy decisions.

Suggested Citation

  • Chen, Dean T. & Anderson, Carl G., 1988. "Evaluation of Uncertainties Affecting Policy Decision of the 1988 Cotton Program," Staff Reports 257919, Texas A&M University, Agricultural and Food Policy Center.
    • Handle: RePEc:ags:tamfsr:257919
    DOI: 10.22004/ag.econ.257919
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    File URL: https://ageconsearch.umn.edu/record/257919/files/magr-texasam-106.pdf
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    References listed on IDEAS

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    1. Usa Ers, 1984. "Situation and Outlook," Food Review/ National Food Review, United States Department of Agriculture, Economic Research Service, vol. 0(1), March.
    2. Glaser, Lewrene K., 1986. "Provisions of the Food Security Act of 1985," Agricultural Information Bulletins 309344, United States Department of Agriculture, Economic Research Service.
    3. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
    4. Lawrence R. Klein, 1981. "The value of models in policy analysis," Proceedings – Rural and Agricultural Conferences, Federal Reserve Bank of Kansas City, pages 1-21.
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    1. Chen, Dean T. & Anderson, Carl G., 1990. "Cotton Market Responses to 1985 Food Security Act, Dollar Devaluation and U.S. Weather Disturbances," Research Reports 257904, Texas A&M University, Agricultural and Food Policy Center.

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