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Finance and Economics Discussion Series
The Finance and Economics Discussion Series logo links to FEDS home page Why Are Estimates of Agricultural Supply Response So Variable?
Francis X. Diebold and Russell L. Lamb

Abstract: Estimates of the response of agricultural supply to movements in expected price display curiously large variation across crops, regions, and time periods. We argue that this anomoly may be traced, at least in part, to the statistical properties of the commonly-used econometric estimator, which has infinite moments of all orders and may have a bimodal distribution. We propose an alternative minimum- expected-loss estimator, establish its improved sampling properties, and argue for its usefulness in the empirical analysis of agricultural supply response.

Keywords: Agricultural supply response, Bayesian estimation, MELO estimation

Full paper (652 KB PDF) | Full paper (849 KB Postscript)

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Last update: July 16, 1997