POLICY IMPLICATIONS OF UNIT ROOT NONSTATIONARITY IN MULTIPRODUCT ACREAGE RESPONSE SYSTEMS

J. Stephen Clark and John Spriggs

No 271207, 1991 Annual Meeting, August 4-7, Manhattan, Kansas from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper explores the theoretical and empirical issues in unit root non-stationarity for multiproduct acreage response systems. The policy implication of a unit root in a multivariate autoregressive time series like a system of acreage responses is very disturbing; it implies that even a one-shot government policy that influences acreage will have a permanent response associated with it. A wheat/barley acreage response system for the Prairie province region of Canada is estimated and the existence of a unit root cannot ~e rejected empirically. The response of the stationary system of acreage responses to a policy shock is shown to be radically different from the response of a non-stationary system of acreage responses even though the empirical estimates of the reduced form parameters are only marginally different between the two models.

Keywords: Agricultural and Food Policy; Land Economics/Use (search for similar items in EconPapers)
Pages: 27
Date: 1991-08-05
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea91:271207

DOI: 10.22004/ag.econ.271207

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