DYNAMIC FERTILIZER NUTRIENT DEMANDS FOR CORN - A COINTEGRATED AND ERROR-CORRECTING SYSTEM

Past studies of the demand for fertilizer have typically been based on static models which assume that adjustments toward equilibrium are instantaneous. This article builds on past studies by developing a dynamic model of nutrient demands of corn. Unit root and cointegration tests demonstrate that fertilizer demands of corn are dynamic. Therefore, statistically correct estimates can be obtained using a dynamic model. A set of error-correction models for nitrogen, phosphate, and potash use in corn production are estimated. Results provide strong statistical evidence that nutrient demands of com are price inelastic both in the short and the long run.