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Do price stabilisation schemes contribute to stability?

April 26, 2017contribute price Schemes stabilisation stability

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Do price stabilisation schemes contribute to stability?

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The impact of price stabilisation schemes on producer expectations has generally been ignored by policy makers. Using a theoretical model of the Canadian prairie barley market, unconditional mean price and two-year moving-average price stabilisation schemes are compared with no stabilisation, assuming rational expectations. Both price convergence and variance were affected by the choice of the price stabilisation scheme.