 The effects of purchasing and price subsidy policies for agricultural products under target zonesChen Li-Ju (), Shih Wen Hu, Vey Wang, Jiandong Wen and Chusheng Ye Economic Modelling, 2014, vol. 43, issue C, 439-447 Abstract: A good harvest usually leads to a collapse of agricultural prices since the price elasticity of agricultural products is relatively low. To stabilize the market and protect farmers, many countries have introduced a target zone policy, together with product purchasing or price subsidy strategies. This article analyzes the effect of a target zone with different strategies operating in a coordinated manner. The results show that a target zone policy with agricultural product purchases does not necessarily stabilize agricultural product wholesale prices, but is able to stabilize manufacturing product prices, if the price effect is smaller than the sum of the wealth and asset effects for agricultural products and the price effect is larger than the interest rate effect for manufacturing products. On the contrary, a target zone policy with an agricultural product price subsidy will generate the “honeymoon effect” for agricultural product wholesale prices, but will result in unstableperformance of manufacturing product prices. Keywords: Agricultural prices; Buffer fund; Buffer stock; Honeymoon effect; Target zone (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:43:y:2014:i:c:p:439-447 DOI: 10.1016/j.econmod.2014.09.007 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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