Document Type

Article

Publication Version

Published Version

Publication Date

11-1989

Journal or Book Title

The Review of Economics and Statistics

Volume

71

Issue

4

First Page or Article ID Number

605

Last Page

613

DOI

10.2307/1928102

Abstract

A model that includes bounded price variation and rational expectations by producers is estimated for the U.S. corn market. The resulting model specification is highly nonlinear though since the probability of market equilibrium must be determined endogenously. Unlike previous research, the crossequation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using Fair and Taylor's (1983) procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models. The resulting model is compared against a standard equlibrium model with naive expectations. The results show the bounded prices model is a superior specification.

Comments

This article is from The Review of Economics and Statistics 71 (1989): 605–613, doi:10.2307/1928102. Posted with permission.

Copyright Owner

MIT Press

Language

en

File Format

application/pdf

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