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

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.


Issue Date:
2001
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/201568
Total Pages:
29
Series Statement:
FSWP
2001-03




 Record created 2017-04-01, last modified 2017-11-18

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)