Donald J. Liu

Common stochastic trends in pacific rim stock markets

Abstract This study examines the common stochastic trends among national stock prices of the U.S. and five East Asian countries, including Japan, Taiwan, Hong Kong, Singapore, and South Korea. Through Johansens maximum likelihood estimation procedure, two cointegration relationships are identified and the six stock price variables are found to share four common unit roots. The result suggests that the U.S. and Taiwan markets may not belong to a “common” stock region containing the remaining four countries. The result also shows that most variables have the same adjustment speed in moving from short-run disequilibria toward the common trend. Finally, impulse response analyses suggest that short-run adjustments to temporary shocks occur rather quickly for some countries, and that for others the pattern and magnitude of the adjustments may be influenced by commonalities in ethnic and other backgrounds of the countries involved.

Generic Fluid Milk Advertising, Demand Expansion, and Supply Response: The Case of New York City

A transfer function was used to estimate the fluid milk demand equation of New York City. The consumption effect of a generic fluid milk advertising program in the city was found to be positive and statistically significant. The resulting higher blend price of milk was found to have a negligible effect on the subsequent supply of milk. Though being successful in generating positive returns on advertising it was found that a 35% reduction in the advertising expenditures would have been optimal in the marginal sense.

Welfare Comparisons of U.S. Dairy Policies with and without Mandatory Supply Control

The existence of costly dairy surpluses has led some policy makers to argue in favor of mandatory supply controls as an alternative to existing dairy policy. A dynamic econometric model is used to simulate the changes in equilibrium prices, quantities, producer and consumer welfare, and government costs that would occur if mandatory controls were adopted. The results show that while such a change in policy would eliminate the costs associated with current price supports, the benefits accruing to producers would be achieved at the expense of consumers and processors.

Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector

This article addresses the issues of investment/disinvestment asymmetry and a possible existence of a sluggish regime in the demand for a quasi-fixed input in the U.S. hog production sector. Adopting a new threshold estimation procedure, quarterly data from 1970 through 2002 are used to estimate a regime-dependent investment demand equation for a quasi-fixed input, taking sows as a proxy. The results support the existence of three regimes over alternative specifications precluding the sluggish regime, confirming the existence of asset fixity in hog production. The results also highlight the importance of accounting for investment rigidity when estimating hog supply and variable input demands. Copyright 2007, Oxford University Press.

The Effectiveness of Generic versus Brand Advertising: The Case of U.S. Dairy Promotion

This article compares the effectiveness of generic versus. brand advertising for fluid milk and cheese. The analysis is based on estimated fluid milk and cheese demand equations and on an analysis of optimal reallocations between generic and brand advertising expenditures. The issue of generic versus brand advertising effectiveness is examined in two ways. First, the advertising elasticities of demand for fluid milk and cheese are computed and compared. Second, optimal reallocation levels between generic and brand advertising expenditures are simulated. From the elasticity point of view, in two of the three estimated demand equations, the generic advertising elasticity is larger than its brand counterpart. However, it is erroneous to just look at advertising elasticities. The optimality condition must also be considered. The optimal results suggest that dairy farmers could achieve increases in sale volumes and revenues by reallocating some of the generic dollars to brand fluid advertising. The increases in the sale volume and revenues from doing so are about 3% for volume and 1% for revenues. However, the simulation results should be interpreted with care because as one moves away from the historical advertising levels, the estimated equations used in the simulation become less reliable. This is relevant because the optimal solutions call for large percentage reallocations. Finally, the results also suggest that dairy farmers should not divert generic dollars to brand cheese advertising. A strategic implication is that dairy farmers should consider establishing some type of fund matching relationship with brand fluid companies.

Estimating Threshold Effects of U.S. Generic Fluid Milk Advertising

Adopting a spline threshold estimation procedure, this article investigates the threshold effects on demand of generic fluid milk advertising. A quarterly fluid milk demand equation with unknown thresholds is estimated. The results support the existence of a minimum threshold below which advertising has no impact on sales, and an upper threshold beyond which the law of diminishing returns dictates. Advertising is also found to have the effect of rendering fluid milk demand less elastic with respect to own price, and more elastic with respect to income. The simulations highlight the importance of accounting for threshold effects when evaluating promotion programs. Copyright 2010, Oxford University Press.

The Impact of Domestic and Foreign Macroeconomic Variables on U.S. Meat Exports

This paper examines the impact of domestic and foreign macroeconomic variables on U.S. meat exports, including beef, pork, turkey, and chicken, in the context of an open economy. The results show that foreign macroeconomic variables exert more significant and persistent effects on U.S. meat exports than domestic macroeconomic variables. The implication is that the U.S. can increase its meat exports more effectively by expending efforts on international macroeconomic policy coordination rather than on domestic sectoral policy. The results also suggest that macroeconomic models of the agricultural sector should include foreign variables and should not be limited only to domestic ones.

Facilitating Classroom Economics Experiments With an Emerging Technology: The Case of Clickers

The audience response system (ARS) has increasingly been used to engage students by eliciting and analyzing responses to questions posed by instructors. The authors discuss how they used the system to facilitate pit market trading in a microeconomics class, report the efficacy of the approach and provide suggestions extending the use of ARS to other experiments. Using the ARS to facilitate active learning by engaging students in economics experiments has pedagogical advantages over both the labor-intensive approach of pencil-and-paper and the capital-intensive route of relying on networked or on-line computer labs which oftentimes preclude or restrict face-to-face student interactions. Thus, the new method represents an added advantage on top of such conventional functions as taking attendance and administering quizzes of this increasingly popular classroom technology.

Food versus Crude Oil: What Do Prices Tell Us? Evidence from China

Purpose - – The purpose of this paper is to investigate the causal relationship between the prices of rice, crude oil, wheat, corn and soybean in China and estimate the long-run and short-run price relationships. Design/methodology/approach - – Using monthly price date over the period of January 1998-December 2013 in China, this paper employs an autoregressive distributed lag (ARDL) bounds test to explore the cointegration relationship among the price variables and estimate the ARDL long-run price relationship and the short-run error correction process (ARDL-EC). Findings - – The empirical results indicate that crude oil, as one of the forcing variables along with wheat, corn, and soybean prices, is effecting rice price in China. Both the long-run and short-run price transmission elasticity estimates suggest the importance of crude oil price on the formation of rice prices. Furthermore, the adjustment speed coefficient is found to be statistically significant, supporting the notion that there is an error correction mechanism for maintaining the long-run price relationship facing short-run shocks. Originality/value - – This paper adopts four types of commodity food prices to explore the relationships with crude oil price. The evidence of market integration, including the degree of price transmission and the speed of adjustment, remains a crucial step to proceed with the government intervention.