The Effects of Stocks and Price Floor on Dynamics and Volatility: An Application to the U.S. Nonfat Dry Milk Market

Kwansoo Kim and Jean-Paul Chavas ()

No 201570, Working Papers from University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group

Abstract: This paper presents an econometric analysis of the effects of price support program and stocks on price dynamics and price volatility. Considering a price support program as a censoring scheme, market prices are specified as a dynamic Tobit model under time varying volatility. The model is applied to the U.S. nonfat dry milk market, based on monthly data for the period of 1970-2000. The econometric results show how the price support program and stocks (both private and public) affect expected price and price volatility. They document the role of stocks in reducing price volatility. The results also show the impacts of market liberalization on price dynamics.

Keywords: Food Consumption/Nutrition/Food Safety; Research and Development/Tech Change/Emerging Technologies; Research Methods/Statistical Methods (search for similar items in EconPapers)
Pages: 33
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwfswp:201570

DOI: 10.22004/ag.econ.201570

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