Econometric Disequilibrium Research Articles

An analysis of bargaining power for milk cooperatives and milk processors in Florida

The Florida dairy market has a few fluid milk processors and many dairy farmers. The dairy farmers are represented in negotiation with the processors by a cooperative. This research builds a theoretical model of bargaining between the processors and a cooperative. The model is applied to the Florida dairy market to examine price negotiations between Florida milk processors and a dairy cooperative. An expectation maximization (EM) algorithm along with maximum likelihood estimation is used to estimate the econometric disequilibrium model with time series data for the period of October 1998 to May 2009. The results show that the class I price set by the Federal Milk Marketing Order is the major factor influencing the cooperative’s supply reservation price. Negotiated quantity and production seasonality affect the processors’ demand reservation price. The processors appear to be more patient and have higher average bargaining power (0.8804) than the cooperative (0.1196). The highest (lowest) bargaining power for the cooperative (processors) occurred in 2008 and the lowest (highest) bargaining power for the cooperative (processors) occurred in 2001.

Disequilibrium econometrics: 25 years later*

The author concludes that disequilibrium econometrics, as it developed more than 20 years ago, is not suitable for policy analysis. Various new opportunities are outlined that can put this area on the research agenda again.

Credit Stagnation in Latin America

This paper examines the recent marked slowdown in bank credit to the private sector in Latin America. Based on the study of eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Peru, Mexico, and Venezuela), the magnitude of the slowdown is documented, comparing it to historical behavior and to slowdown episodes in other regions of the world. Second, changes in bank balance sheets are examined, investigating whether the credit slowdown is merely a reflection of a slowdown in bank deposits, or whether the asset side has changed. Third, following an econometric disequilibrium approach used in recent studies of credit slowdowns in East Asia and Finland, the paper investigates possible causes for the slowdown in three countries: Colombia, Mexico, and Peru. While both supply and demand factors appear to have played key roles, their relative importance has varied across the three countries.

Why Don't They Lend? Credit Stagnation in Latin America

This study examines the recent marked slowdown in bank credit to the private sector in Latin America. Based on a study of eight countries – Argentina, Bolivia, Brazil, Chile, Colombia, Peru, Mexico, and Venezuela – the magnitude of the slowdown is documented, comparing it to historical behavior and to similar episodes in other regions of the world. Second, changes in bank balance sheets are examined to determine whether the credit slowdown is merely a reflection of a downturn in bank deposits or whether the asset side has changed. Third, following an econometric disequilibrium approach used in recent studies of bank credit in East Asia and Finland, the paper investigates the possible causes in three countries: Colombia, Mexico, and Peru. While both supply and demand factors appear to have played key roles, their relative importance has varied across the three countries.

Credit Stagnation in Latin America

This study examines the recent marked slowdown in bank credit to the private sector in Latin America. Based on the study of eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Peru, Mexico, and Venezuela), the magnitude of the slowdown is documented, comparing it to historical behavior and to slowdown episodes in other regions of the world. Second, changes in bank balance sheets are examined to determine whether the credit slowdown is merely a reflection of a slowdown in bank deposits, or whether the asset side has changed. Third, following an econometric disequilibrium approach used in recent studies of credit slowdowns in East Asia and Finland, the paper investigates possible causes for the slowdown in three countries: Colombia, Mexico, and Peru. While both supply and demand factors appear to have played key roles, their relative importance has varied across countries.

Testing for credit rationing: An application of disequilibrium econometrics

Testing for credit rationing has traditionally consisted of examining the response of loan rates to other market interest rates. A model developed by Greenwald and Stiglitz (1990) allows for a direct test for persistent excess demand for credit. I estimate three models of the short-term credit market: all firms experience equilibrium, all firms are rationed (have an excess demand for short-term credit), and a mixture of the two. A heuristic likelihood ratio test comparing the all equilibrium likelihood to the mixed likelihood constitutes the test for credit rationing. Application of the test to firm-level data reveals that banks ration some firms in every sample examined.

Asymmetry in economic time series and the simultaneous switching autoregressive model

One important characteristic of many economic time series, which has been often ignored, is the asymmetrical movement between the downward phase and the upward phase in their sample paths. Since this feature cannot be described by the standard autoregressive moving average (ARMA) time-series models, we introduce a new class of the simultaneous switching autoregressive (SSAR) model, which is a non-linear Markovian switching time-series model. We discuss the problems of coherency, ergodicity, the stationary distribution and its moments, and the estimation method for the model's unknown parameters. We also give a simple empirical example of an agricultural market model with price and quantity in the context of disequilibrium econometrics.

Models of disequilibrium and shortage in centrally planned economies Christopher Davis and Wojciech Charemza, editors Chapman and Hall, London and New York, 1989, 501 pp.

Portes applied the econometric disequilibrium model of market economies to Centrally Planned Economies (CPEs) to show that the consumer goods sector was in equilibrium. Kornai considered these models inapplicable to CPEs and regarded CPEs as chronic shortage economies. Arguments on both sides of the debate are presented in this book. The conflict between Portes and Kornai lies in their microeconomic view of CPEs. While Portes acknowledges the welfare loss from shortages, Kornai analyzes and emphasizes it. Portes' view implies that changes in relative prices can reestablish equilibrium in CPEs. Kornai disagrees because CPEs do not respond to price changes like market economies. Only total reform, now attempted in many transition economies, can eliminate the imbalances.

Price and quantity controlled agricultural markets and disequilibrium econometrics: a survey

ABSTRACTThis survey reviews the literature on estimating single markets in disequilibrium in the presence of regulated price and/or quantity controls, e.g., minimum price regimes and/or marketing quotas. Most of the literature is found to describe pure econometric technique, with only a few applications having emerged to date. Various reasons for the broad non‐acceptance of this literature are offered, including a perceived lack of realism. Proposals to close this econometric theory–application gap are put forward, including: the use of effective demand concepts in specifying demand and supply functions; synthesizing some closely related literature on agricultural price/quantity controls with disequilibrium econometrics (i.e., endogenous government policy and the effects controls have on yield uncertainty and price risk); and outlining more ‘applicable’ econometric technique extensions.

Price and quantity controlled agricultural markets and disequilibrium econometrics: A survey

This survey reviews the literature on estimating single markets in disequilibrium in the presence of regulated price and/or quantity controls, e.g., minimum price regimes and/or marketing quotas. Most of the literature is found to describe pure econometric technique, with only a few applications having emerged to date. Various reasons for the broad non-acceptance of this literature are offered, including a perceived lack of realism. Proposals to close this econometric theory-application gap are put forward, including: the use of effective demand concepts in specifying demand and supply functions; synthesizing some closely related literature on agricultural price/quantity controls with disequilibrium econometrics (i.e., endogenous government policy and the effects controls have on yield uncertainty and price risk); and outlining more ‘applicable’ econometric technique extensions.

A quantity-constrained expenditure system: A note on Podkaminer's disequilibrium computations

It is shown that in a positive excess demand situation Podkaminer's disequilibrium measure the ratio of notional demand to the observed quantity, is not related to excess demand, shortage, or spillover effect. An alternative measure which is based on the Clower-Benassy effective demand, is proposed. Podkaminer's expenditure model is reformulated in a quantity-constrained form, which is used for estimating disequilibrium and spillover effects for Poland. The aggregate excess demand computed from the quantity-constrained expenditure system does not differ significantly from that estimated from an econometric disequilibrium model.

Modélisation des exportations françaises de blé tendre : estimation en déséquilibre

High dependency of french soft wheat market on exports suggests to model the exports function and to quantify their shifters. Our approach resorts on disequilibrium econometrics.

Estimating disequilibrium models with limited a priori price-adjustment information

Economic theory imposes few a priori conditions on price adjustment and thus requires econometric disequilibrium models to be both sufficiently general and computationally tractable. The switching regression model of Lee and Porter (1984) meets these requirements. Unlike previous models, price adjustment enters without an explicit adjustment equation or the restriction that price changes reveal the sign of excess demand. I apply the model to the U.S. commercial loan market from 1979–1984. The estimates suggest a pattern of excess demand consistent with the financial developments of the period.

An econometric disequilibrium model for electric power system planning in Nigeria

An econometric disequilibrium model for electric power system planning in Nigeria

Modelling parallel markets in centrally planned economies: The case of the automobile market in Poland

The paper formulates a queuing model for durable goods which leads to the conclusion that the permanent appearance of excess demand may represent equilibrium. These notions are applied to the automobile market in Poland. This market is modeled as an econometric disequilibrium model showing permanent excess demand with three separate submarkets: (1) the nonclearing market for new cars; (2) the market for new cars sold for hard currencies; and (3) the second-hand market. Maximum likelihood estimates are obtained for the parameters. From these estimates we derive an estimate of the mean waiting time for new cars and find it to be compatible with more informal evidence.

A model for investment in Poland: A disequilibrium econometrics approach

A demand/supply type econometric model for investments in the Polish economy is analysed. Starting from microeconomic foundations, functions describing the behaviour of central planners and state enterprises are derived. The model is estimated using annual data for the period 1961–1980. It is used for simulation of investment excess demand and consumption response to smoothing of the investment process. The results indicate that investment excess demand was positive in 1960–1979 and negative in 1980. Simulated response of consumption supply to smoothing of the investment process is up to 37% over the observed consumption level.

A note on price adjustment models in disequilibrium econometrics

Three different price adjustment equations are compared, in the framework of a standard disequilibrium model, and are shown to provide observationally equivalent models. Implications for testing equilibrium are spelled out.

A Discussion of Belgian Unemployment, Combining Traditional Concepts and Disequilibrium Econometrics

With a GDP of less than $100 billion and exports of more than $60 billion, Belgium comes perhaps closer than any other country to being a ‘small open economy’. Consequently, trends in world trade and export performance have a major impact on domestic activity, whereas the impact of domestic fiscal policy is damped by import leakages. Table 1 presents a few figures confirming these observations.

The likelihood function and a test for serial correlation in a disequilibrium market model

The likelihood function for an econometric disequilibrium market model of Fair and Jaffee with autocorrelated disturbances is derived. A statistic is introduced for the test of serial correlation in such a model. The statistic can be regarded as generalization of the Durbin-Watson statistic.

Test for normality in the econometric disequilibrium markets model

Test for normality in the econometric disequilibrium markets model