Econometrica: Jul 1962, Volume 30, Issue 3
An Investigation of the Dynamic Stability and Stationary States of the United States Potato Market, 1930-1958
P. ZusmanIn this paper, a 14-equation model of the United States potato industry is presented. Four of the equations contain endogenous variables lagged one time period. The solution to this system of first-order difference equations is presented to determine the system's stability. The stochastic stability is then investigated by obtaining estimates of the limiting variance-covariance matrix of endogenous variables. Thes matrix shows the cumulated effect of historical random shocks. This is followed by a similar study of the effect of erratic variation in exogenous variables. Next is a comparative static analysis, comparing actual values of variables with their stationary state values. The impact of the price support program on the industry is analyzed. Impact and stationary state multipliers are computed and short and long run effects of structural changes are evaluated.
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