The Relationship Between Price Stabilization and Cycles in the Canadian Wheat Market

J. Stephen Clark and K.K. Klein
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J. Stephen Clark: Nova Scotia Agricultural College
K.K. Klein: The University of Lethbridge

Agricultural and Resource Economics Review, 1994, vol. 23, issue 1, pages 22-28

Abstract: In this study, moving average price stabilization schemes were analyzed under the assumption of rational expectations. It was shown that moving average price schemes may induce cyclical behaviour into market prices where no cyclical pattern previously existed. Moving average price stabilization schemes are important to Canadian agricultural policy analysis because they are a characteristic of stabilization programs in Canada. Indeed, the Agricultural Stabilization Act, introduced in 1975, and the Gross Revenue Insurance Program, introduced in 1991, use moving average prices to calculate returns to producers.

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