Explaining the German hog price cycle: A nonlinear dynamics approach

We investigated German hog-price dynamics with an innovative ‘diagnostic’ modeling approach. Hog-price cycles are conventionally modeled stochastically—most recently as randomly-shifting sinusoidal oscillations. Alternatively, we applied nonlinear time series analysis to empirically reconstruct a deterministic, low-dimensional, and nonlinear attractor from observed hog prices. We next formulated a structural (explanatory) model of the pork industry to synthesize the empirical hog-price attractor. Model simulations demonstrate that low price-elasticity of demand contributes to aperiodic price cycling – a well know result – and further reveal two other important driving factors: investment irreversibility (caused by high specificity of technology), and liquidity-driven investment behavior of German farmers.


Editor(s):
Schiefer, Gerhard
Rickert, Ursula
Subject(s):
Issue Date:
2015-05
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
ISSN 2194-511X (Other)
PURL Identifier:
http://purl.umn.edu/206210
Page range:
15-35
Total Pages:
21
JEL Codes:
C02; C32; D22; Q02; Q11




 Record created 2017-04-01, last modified 2017-08-22

Fulltext:
Download fulltext
PDF

Rate this document:

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