Abstract
HE CENTRAL inquiry of this paper is concerned with the effect of the introduction of stochastic terms on the reliability of deterministic conclusions obtained from simulation. Using an estimated market model,1 two policy questions-the impact of imported surpluses and the management of government stocks of foodgrains-are examined in the context of stochastic simulation. For each policy question three groups of simulation experiments are conducted and the results compared: (1) The model is used in its deterministic form; (2) random disturbance terms are added to the stochastic equations; (3) random disturbance terms are added to particular coefficients. In the analysis that follows only one aspect of each policy question is examined, and the results are not meant to supply all of the information that would be needed for a policy evaluation. However, the examples shed new light on the two questions and indicate the usefulness of stochastic simulation in the construction of confidence intervals around deterministic conclusions.
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