TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

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Annexes Table E.7 – Unit root tests on de-seasonalized time series, KPSS statistics (1978:12-2003:12) Variable n°of lags logs (diff. logs) 5% critical value Logs Differentiated logs swfr 24(23) c 0.463 1.007 0.335 hrw 24(23) c 0.463 0.144 0.098 c= constant Table E.8 – Unit root tests on de-seasonalized time series, KPSS statistics (1978:12-1993:06) Variable n°of lags logs (diff. logs) 5% critical value Logs Differentiated logs swfr 24(23) c 0.463 0.138 0.289 hrw 24(23) c 0.463 0.288 0.147 c= constant Table E.9 – Unit root tests on de-seasonalized time series, KPSS statistics (1993:07-2003:12) Variable n°of lags logs (diff. logs) 5% critical value Logs Differentiated logs swfr 24(23) c 0.463 0.454 0.335 hrw 24(23) c 0.463 0.105 0.098 c= constant 151
The notion of “price transmission” refers to the co-movement shown by prices of the same good in different locations. In this respect, many empirical works essentially aim at verifying whether the Law of One Price holds. Cointegration models especially have shown to have an “intuitive appeal”, as they allow disentangling short and long run dynamics. However, despite the use of increasingly sophisticated techniques, empirical findings are extremely mixed. Indeed, a number of factors are expected to prevent prices from convergence. This work focuses on how international price transmission is affected by domestic and border policies. The case study is constituted by price transmission between EU and US soft wheat markets in the years 1978-2003. The objective of this analysis is twofold. On the one side, to develop a consistent theoretical framework to understand under which conditions co-movement between EU and US prices is expected, after considering the presence of domestic and border policies: namely, the European Common Agricultural Policy and the implementation of the Uruguay Round Agreement on Agriculture of the WTO. On the other, to derive different econometric models in order to test whether such a co-movement exists, and to which extent it has been affected by policy reforms. The work is organized as follows. After a general introduction to the study of price transmission and to empirical tests for spatial price analysis (chapters 2 and 3), international soft wheat markets are described (chapter 4). This allows to develop a consistent theoretical framework for the analysis, according to which different empirical models are developed and tested (chapters 5 and 6). They represent an original attempt of explicitly combining policy and price data. Findings contribute to shed light on a complex and controversial empirical evidence and, in addition, to provide analytical tools which are of a more general interest for the study of international price dynamics. Giulia Listorti è dottore di ricerca in Economia Politica presso il Dipartimento di Economia dell’Università Politecnica delle Marche.
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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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6 EMPIRICAL ANALYSIS: COINTEGRATION
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Page 116 and 117: REFERENCES Alderman, H., 1992. Inte
Page 118 and 119: References agricultural policies: s
Page 120 and 121: References Isard, P., 1977. How far
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Page 127 and 128: Annexes METHODOLOGY DATA USED MAJOR
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Page 151: Annexes Table E.5 - Unit root tests
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