FORECASTING CATTLE PRICES IN THE PRESENCE OF STRUCTURAL CHANGE

Recent empirical research and development in the cattle industry suggest several reasons to suspect structural change in economic relationships determining cattle prices. Standard forecasting models may ignore structural change and may produce biased and misleading forecasts. Vector autoregressive (VAR) models that allow parameters to vary with time are used to forecast quarterly cattle prices. The VAR procedures are flexible in that they allow the identification of structural change that begins at an a priori unknown point and occurs gradually. The results indicate that the lowest RMSE for out-of-sample forecasts of cattle prices is obtained using a gradually switching VAR model. However, differences between the gradually switching VAR model and a univeriate ARIMA model are not strongly significant. Impulse response functions indicate that adjustments of cattle prices to new information have become faster in recent years.

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Year of publication:	1992-12
Authors:	Goodwin, Barry K.
Publisher:	AgEcon Search
Subject:	Demand and Price Analysis

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Type of publication:	Article
Language:	English
Notes:	Southern Journal of Agricultural Economics>Volume 24, Number 02, December 1992
Source:	BASE

Persistent link: https://www.econbiz.de/10009444070