Dynamics of a market with market participants switching their expectation formation functions: an empirical application to the U.S. hog market

摘要: This paper explores the dynamics of U.S. hog market with three different dynamic models that are distinguished only by their assumptions regard to participants' expectations future prices. The first model assumes all producers in have rational expectations. second a constant fraction static third model, main focus this paper, choose either or every year based on past performance two types Empirical tests such as log-likelihood ratio type specification GMM estimations and one-step ahead forecasts indicate best captures movements price quantity data market, even though value added over is not great. Simulation experiments illustrate will reach steady state framework if external shocks zero. In contrast, never reaches but generates cyclical economic variables. Artificially increasing intensity choice higher than suggested empirical tests, makes described become chaotic.