Bounded Price Variation and Rational Expectations in Endogenous Switching Model of the U.S. Corn Market
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The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).
History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.
Dates of Existence
1898–present
Historical Names
- Department of Economic Science (1898–1910)
- Department of Economics and Political Science (1910-1913)
- Department of Applied Economics and Social Science (1913–1924)
- Department of Economics, History and Sociology (1924–1931)
- Department of Economics and Sociology (1931–1967)
Related Units
- College of Agricultural and Life Sciences (parent college)
- College of Liberal Arts and Sciences (parent college)
- College of Business (parent college)
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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.