TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

Empirical Analysis: Cointegration Models, Structural Breaks and Policy Reform
[ β β hrw β reg1
β reg2
β reg2hrw
β reg3
β t1
β t2
β u ]
swfrt 0 1 t 2 t 3 t 4
t 5 t 6 t 7 t 8
t
(6.3)
As explained in chapter 3, all these factors are expected to have lowered the
French prices with respect to the US ones, that is, β6, β7, β8 > 0, without having a
direct impact on price transmission elasticities. Estimates are reported in table 6.5.
α
Table 6.5 VECM with structural breaks: EU and WTO policy regimes, export taxes,
2001/02 campaign
∆swfr t-1
∆swfr t-2
∆swfr t-3
∆swfr t-4
∆hrw t-1
∆hrw t-2
∆hrw t-3
∆hrw t-4
∆swfrt ∆hrwt Cointegration vector
-0.066***
(0.010)
0.012
(0.040) β0 -3.810***
(0.367)
-0.175***
(0.060)
0.297
(0.227) β1 -0.257***
(0.074)
0.231***
(0.060)
0.282
(0.228) β2 0.164**
(0.045)
0.256***
(0.060)
-0.488**
(0.228) β3 -0.664
(1.061)
0.197***
(0.062)
0.147
(0.235) β4 0.170
(0.218)
0.031*
(0.017)
0.324***
(0.066) β5 -0.236***
(0.074)
-0.055***
(0.018)
-0.118*
(0.069) β6 -0.013
(0.100)
0.008
(0.018)
0.062
(0.069) β7 -0.179*
(0.118)
-0.079***
(0.018)
0.0002
(0.068) β8 0.372***
(0.082)
LM 1.161 (p-value 0.296) 0.547 (p-value 0.932) β1 + β4 = -1 χ2 = 9.213 (p-value 0.002)
ARCH (5) 24.667(p-value .0002) 11.540 (p-value 0.042)
β 2,β3, β4, β5, β6, β7, β8 = 0
χ2 = 34.668 (p-value 0)
SBIC -7.404 HQN -8.301
Standard errors in parenthesis. *significant at 10%; **significant at 5%; *** significant at 1% for the null
hypothesis of zero coefficients
LM: LM test with null hypothesis of no-autocorrelation up to the 18 th lag. ARCH(5): LM test with the null
hypothesis of no ARCH effects up to the 5 th lag. SBIC : Schwartz's Bayesian Information criterion. HQN:
Hannan-Quinn Information criterion
The autocorrelation in the French equation has been removed. This time, even
if both the French and the US adjustment coefficients have the expected sign, the
US one is not significant, which may suggest its weak exogeneity. In the
cointegration vector, although β0, β1 and β2 have very similar values to those
reported in table 6.4 where the additional factors were not considered, β4, β6 and
β7 have not the expected sign. For the latter two, this might well depend on the
short number of observations available for these specific regimes, since export
taxes were imposed for a very few months. Instead, β8 > 0 as expected; moreover,
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