TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

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METHODOLOGY DATA USED MAJOR FINDINGS SWITCHING REGIME-THRESHOLD MODELS Septhon, 2003 They expand Goodwin and Piggott (2001) studies in three directions: they use the direct multivariate test of Hansen and Seo instead of a single equation search to look for confirmatory evidence; they use Hansen tests to determine the number of thresholds; they test for the presence of non-linear cointegration. Sexton et al., 1991 Their estimation is based on a switching regression model with three regimes (the direction of trade flows is fixed, but arbitrage conditions might be violated): efficient arbitrage, relative shortage, relative glut. Only price data are needed. RATIONAL EXPECTATIONS MODELS Goodwin et al., 1990 Typical analyses of the LOP overlooks temporal elements of trade, and assume that parity should hold contemporaneously. They use two different approaches to test the LOP: GMM to estimate rationally formed expected future prices (expectations augmented version of the LOP); nonparametric analysis of price parity. Same as Goodwin and Piggott, (2001). Weekly prices (in levels) of US celery in Florida and California in 6 terminal markets. January 1985-December 1988. Monthly prices (levels) for 34 commodities from various countries, all converted in dollars. The period considered is from July 1973 to December 1985 (72 to 128 obs., depending on the price). Annexes Their results indicate the presence of one threshold in most of the bivariate commodity pairings, and are supported by more general tests of nonlinear cointegration. The methodology allows for investigating market integration, arbitrage efficiency, magnitude of marketing margins, product substitutability, and market competitiveness. They conclude that using a simple-augmented expectations-model produces greater support for the LOP than using contemporaneous prices. Results provide strong support for a rational expectations version of the LOP. For the wheat market, adherence to the standard version of the LOP is limited (only two out of six markets support parity); for the expectations augmented version, the LOP is instead rejected only in one case. 137
Annexes Variable swfr 138 Annex B – Unit root tests Table B.1 – Unit root tests, ADF statistics -18 (1978:12-2003:12) n° of lags logs (diff. logs) n 12(11) c 12(11) c+t 12(11) c+s 12(11) c+t+s 12(11) hrw n 1(0) c 1(0) c+t 1(0) c+s 1(0) c+t+s 1(0) Logs Differentiated logs -0.042 (0.669) -1.823 (0.369) -3.256 (0.074) -1.737 (0.412) -3.183 (0.088) 0.172 (0.736) -3.255 (0.017) -3.325 (0.062) -3.107 (0.026) -3.183 (0.088) -3.761 (0.0001) -3.733 (0.004) -3.606 (0.029) -3.761 (0.003) -3.637 (0.027) n= no constant; c= constant; c+ t=constant and trend; s= seasonal dummies included; p-values are based on MacKinnon (1996) and reported in parenthesis. -12.544 (0) -12.528 (0) -12.511 (0) -12.477 (0) -12.461 (0)
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TESTING INTERNATIONAL PRICE TRANSMI
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Associazione “Alessandro Bartola
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Index 1 INTRODUCTION ..............
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1 INTRODUCTION The notion of “pri
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Introduction These recent phenomena
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Introduction Whereas the Common Agr
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Price Transmission and the Law of O
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3 EMPIRICAL TESTS FOR SPATIAL PRICE
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Empirical Tests for Spatial Price A
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= β 2 i0 Empirical Tests for Spati
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∆p + t ∑ ⎡β⎤ ' ⎡ p t =
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4 INTERNATIONAL SOFT WHEAT MARKETS
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International Soft Wheat Markets Un
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30.000 20.000 10.000 0 1961 1963 19
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250 200 150 100 50 1978:12 Internat
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5 EMPIRICAL ANALYSIS: COINTEGRATION
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Empirical Analysis: Cointegration M
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α LM test ARCH(13) Empirical Analy
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Page 113 and 114: Concluding Remarks These models rep
Page 116 and 117: REFERENCES Alderman, H., 1992. Inte
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Page 120 and 121: References Isard, P., 1977. How far
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