A Heteroskedastic Multivariate Tobit Analysis of Price Dynamics in the Presence of Price Floors
18 Pages Posted: 21 Apr 2020
Date Written: August 2004
This article presents an econometric analysis of the effects of price floors on price dynamics and price volatility in a multimarket context. We investigate the implications of a government price‐support program providing a censoring mechanism to the price determination process. The analysis uses a dynamic multivariate Tobit model under time‐varying volatility. The model is applied to the U.S. dairy markets with a special focus on the effects of government price‐support programs in a period of market liberalization. The econometric analysis provides useful information on the multimarket effects of price supports on price dynamics and price volatility.
Keywords: heteroskedastic multivariate Tobit, market liberalization, price dynamics, price volatility
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