POLICY IMPLICATIONS OF UNIT ROOT NONSTATIONARITY IN MULTIPRODUCT ACREAGE RESPONSE SYSTEMS

This paper explores the theoretical and empirical issues in unit root non-stationarity for multiproduct acreage response systems. The policy implication of a unit root in a multivariate autoregressive time series like a system of acreage responses is very disturbing; it implies that even a one-shot government policy that influences acreage will have a permanent response associated with it. A wheat/barley acreage response system for the Prairie province region of Canada is estimated and the existence of a unit root cannot ~e rejected empirically. The response of the stationary system of acreage responses to a policy shock is shown to be radically different from the response of a non-stationary system of acreage responses even though the empirical estimates of the reduced form parameters are only marginally different between the two models.


Issue Date:
Aug 05 1991
Publication Type:
Conference Paper/ Presentation
Record Identifier:
http://ageconsearch.umn.edu/record/271207
Language:
English
Total Pages:
27




 Record created 2018-04-11, last modified 2018-04-11

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