TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

Index
1 INTRODUCTION .................................................................................................................. 7
2 PRICE TRANSMISSION AND THE LAW OF ONE PRICE ......................................... 13
2.1 INTRODUCTION ........................................................................................................... 13
2.2 SOME BASIC CONCEPTS ............................................................................................... 14
2.3 A THEORETICAL PROBLEM: WHY SHOULD THE LOP HOLD? ........................................ 18
2.4 CONCLUDING REMARKS .............................................................................................. 21
3 EMPIRICAL TESTS FOR SPATIAL PRICE ANALYSIS ............................................. 23
3.1 INTRODUCTION ........................................................................................................... 23
3.2 EMPIRICAL TESTS: A GENERAL FRAMEWORK ............................................................... 24
3.2.1 Simple regression and correlation analysis ..................................................... 24
3.2.2 Dynamic regression models based on a point location model ......................... 27
3.2.2.1 Granger causality and lead-lag relationships ............................................................ 28
3.2.2.2 Ravallion and Timmer market integration criteria ................................................... 29
3.2.2.3 Impulse response analysis ........................................................................................ 31
3.2.2.4 Cointegration analysis .............................................................................................. 32
3.2.3 Switching regime models ................................................................................. 32
3.2.4 Rational expectations models .......................................................................... 35
3.3 THE USE OF COINTEGRATION TECHNIQUES IN SPATIAL PRICE TRANSMISSION .............. 35
3.3.1 Unit root tests applied to price series .............................................................. 41
3.3.2 Different cointegration techniques................................................................... 42
3.3.2.1 Threshold models ..................................................................................................... 43
3.3.2.2 Asymmetric adjustment models ............................................................................... 45
3.3.2.3 Models with structural breaks .................................................................................. 46
3.3.3 Cointegration models and price transmission: empirical evidence ................. 48
3.4 PROBLEMS IN EMPIRICAL MODELS RELYING ON PRICE DATA ....................................... 49
3.5 CONCLUDING REMARKS .............................................................................................. 51
4 INTERNATIONAL SOFT WHEAT MARKETS UNDER POLICY
INTERVENTION ................................................................................................................... 53
4.1 INTRODUCTION ........................................................................................................... 53
4.2 TRADE FLOWS AND POLICIES IN INTERNATIONAL WHEAT MARKETS ............................ 54
4.2.1 International soft wheat markets: an overview ................................................ 54
4.2.2 European and international trade policies for soft wheat ............................... 59
4.3 POLICY VARIABLES AND PRICE TRANSMISSION: A THEORETICAL FRAMEWORK ........... 64
4.4 THE DATA ................................................................................................................... 68