TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

Concluding Remarks
These models represent an attempt of explicitly combining policy and price
data. The observable policy regime change has been simulated with the
construction of an ad hoc composite variable and other econometric devices.
The consistent behaviour of EU adjustment coefficients suggests that the role
of the US price might be understood only in light of adequate consideration for
policy regimes. The adjustment coefficients of the French price always display the
correct sign, although they tend to be significant and higher in magnitude only
when the intervention price appears in the cointegration vector.
The response of the US price leaves instead some questions open: US
adjustment coefficients are usually much smaller in value and not significant. This
could be due to its exogeneity, but, also, to the fact that the cointegration relation
is mostly driven by the intervention price, which in turns brings some
interpretative problems.
The model presented in chapter 6, instead, directly explores the dynamic of a
system constituted by the US and the French prices, only. In this case, the policy
regime changes are assumed to influence the parameters of the long run relation
linking the two prices. The policy regime changes are then expected to have an
impact on an existing relation, as some previous empirical evidence would
suggest (Thompson and Bohl 1999, Thompson et al. 2002a and 2002b). A
cointegration model allowing for structural breaks in the deterministic term of the
cointegration vector is tested. The Johansen, Mosconi and Nielsen (2000) model
is partially modified by introducing more than one break.
Once again, the French response to the disequilibria in the long run relation is
found to be consistent and significant; moreover, also the response of the US price
is consistent, which solves some of the interpretative problems of chapter 5.
The theoretical assumptions are confirmed: indeed, the MacSharry and Agenda
2000 reforms, by lowering intervention prices, did reduce the distance of the EU
prices from the world ones; while the URAA implementation lead to an increased
price transmission elasticity, although perfect price transmission is still not in
place.
Summing up, our empirical findings, which derive from the specific theoretical
framework developed, confirm and contribute to shed light on a complex and
controversial literature, bridging the gap between studies not finding any evidence
of co-movement between the prices considered and those that, conversely, find
evidence of positive and increased price transmission elasticities following the
URAA.
In addition to this, these findings are of a more general interest for the study of
the dynamics occurring in global markets which are increasingly complex and
interconnected.
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