Do Price Stabilisation Schemes Contribute to Stability? Some Counterfactual Evidence from the Canadian Barley Market.

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. This illustrates the influence price stabilisation schemes can have on the stochastic process generating market prices. Copyright 1995 by Oxford University Press.