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A DISEQUILIBRIUM ECONOMETRIC MODEL OF THE AUSTRALIAN RAW WOOL MARKET *
Author(s) -
OCZKOWSKI EDWARD
Publication year - 1997
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.1997.tb00850.x
Subject(s) - disequilibrium , economics , rationing , supply and demand , microeconomics , econometrics , econometric model , price equation , medicine , health care , ophthalmology , economic growth
This paper develops a quarterly disequilibrium model of the Australian wool market. It is postulated that because of inherent market imperfections the market does not clear. The model consists of demand and supply equations for both private and government traders, a minimum condition to determine quantity transacted and a price adjustment equation based on excess demand/supply. Effective demand/supply concepts which recognise the expectation of rationing are employed to model private demand/supply. Supplier price expectations explicitly account for the lower bound imposed by the minimum reserve price scheme (RPS). The estimates suggest that the disequilibrium hypothesis cannot be rejected, as a consequence measures of market imbalance are provided. The model is also used to simulate the effects of the removal of the RPS.