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The Problem of the Persistent Hog Price Cycle: A Chaotic Solution
Author(s) -
Streips Marcus A.
Publication year - 1995
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1243377
Subject(s) - chaotic , econometrics , economics , nonlinear system , function (biology) , production (economics) , production cycle , macroeconomics , biology , engineering , management , physics , quantum mechanics , evolutionary biology , manufacturing engineering
A persistent hog‐corn price ratio has been known to exist since the early 1930s and many attempts have been made since then to model its dynamics. That these models have been ineffectual as forecasting tools is apparent by the fact that the hog cycle has persisted to this day. In this paper I propose that increased forecasting accuracy can be obtained by adjusting traditional forecasting models so that they account for deterministic, nonlinear processes. With improved forecasts, the costs of countercyclical production will decrease, dampening and perhaps even eliminating the cycle. The chaotic dynamics of the hog‐corn price cycle is confirmed, and chaotic models of this system are developed. The analysis provides the framework for developing a function to forecast the dynamics of the hog‐corn price ratio.