An Econometric Analysis of the Effects of Market Liberalization on Price Dynamics and Price Volatility

Jean-Paul Chavas () and Kwansoo Kim

No 201568, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: The paper investigates price dynamics under market liberalization, with a focus on the effects of lowering price floors. We analyze price dynamics by specifying and estimating a dynamic Tobit model under time-varying volatility, where the market price is censored by a government-set support price. The model is applied to the U.S. butter market over the last three decades. The econometric results show how the price support program affects both expected prices and the volatility of prices. It is found that the censoring effects of a price support program can be significant and large even if the price support is set relatively low.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 29
Date: 2001
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Citations: View citations in EconPapers (1)

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https://ageconsearch.umn.edu/record/201568/files/wp2001-3.pdf (application/pdf)

Related works:
Journal Article: An econometric analysis of the effects of market liberalization on price dynamics and price volatility (2006)
Working Paper: AN ECONOMETRIC ANALYSIS OF THE EFFECTS OF MARKET LIBERALIZATION ON PRICE DYNAMICS AND PRICE VOLATILITY (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201568

DOI: 10.22004/ag.econ.201568

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