TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

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International Soft Wheat Markets Under Policy Intervention The distributions tend to be skewed and platykurtic, which are common features of non-stationary price series (Ghoshray 2000, p. 10). Table 4.3 Descriptive statistics of the price time series (euro/t) Time Average Standard deviation Skewness Kurtosis Soft wheat French price 1978:12-2003:12 144.16 22.67 -0.29 -1.02 1978:12- 1988:06 161.18 12.89 -0.23 -1.24 1988:07-1993:06 158.41 8.64 0.14 -0.79 1993:07- 2000:06 126.30 11.57 -0.17 -1.10 2000:07- 2003:12 112.94 12.61 1.48 2.80 1978:12-1995:06 156.51 15.16 -0.54 -0.17 1995:07-2003:12 120.08 13.81 0.414 -0.68 Intervention price 1978:12-2003:12 151.49 32.81 -0.13 -1.53 1978:12- 1988:06 179.14 15.92 -0.34 -0.91 1988:07-1993:06 174.23 6.58 0.28 -0.54 1993:07- 2000:06 119.99 5.46 -0.96 0.47 2000:07- 2003:12 106.31 5.07 0.74 -0.63 1978:12-1995:06 169.82 24.40 0.50 -0.42 1995:07-2003:12 115.74 8.85 -0.47 -1.24 HRW US price 1978:12-2003:12 148.23 29.75 0.48 -0.13 1978:12- 1988:06 157.51 36.16 0.13 -1.03 1988:07-1993:06 133.30 24.32 -0.01 1 1993:07- 2000:06 140.73 21.25 1.09 1.51 2000:07- 2003:12 159.16 16.39 1.32 2.57 1978:12-1995:06 147.59 32.77 0.50 0.89 1995:07-2003:12 149.49 22.82 0.46 0.38 4.5 Concluding remarks As anticipated, a general overview of trade flows and price data on international wheat markets, and of the main policies implemented by some of the biggest exporters and in multilateral trade agreements, makes clear that domestic and border policies play a relevant role in influencing price transmission on soft wheat markets. In this work, the French and the US prices will be studied over the years 1978- 2003; they are assumed to represent, respectively, the EU and the US price. Though, after 1992, the CAP changed considerably, moving from more market oriented mechanisms towards the use of less distortive support, in practice, and although intervention prices were progressively reduced, the same scheme of protection, based on export subsidies and variable levies, kept being in place. 73
International Soft Wheat Markets Under Policy Intervention Under certain conditions, this should hinder the world prices from influencing the domestic ones. In international trade policy, in 1995, the URAA of the WTO aimed at achieved an increased market liberalization; consequently, with an effective “tariffication”, international price transmission elasticities should have increased. However, also in this respect, the so-called “155% rule” might well have reduced its effects on soft wheat markets. In this chapter, all these policy changes have been described in detail, to assess their effects on price transmission in order to develop a consistent theoretical framework. This has the objective of understanding under which conditions the EU and the world prices are expected to interact, provided the presence of the EU domestic and border policies and of the implementation of the URAA of the WTO. A thorough examination of the various combinations of domestic and international market conditions, considering the various policy measures, suggests that the EU and the US price are expected to be positively correlated only if the latter is above both the entry and the intervention price. However, this has never been the case. What is argued is then that it is the intervention price which acts as a threshold under which the world price doesn’t affect the European one. The European price is expected to interact with the world one only when the latter is above the intervention price; otherwise, it will follow the intervention price. The relative position of the US and intervention prices allows the identification of different policy regimes, in which the price transmission relations are different depending on the effectiveness of policy intervention, represented through the position of the intervention price. This theoretical framework represents a development of the one presented in chapter 2 that explicitly addresses the need for taking policy regimes into account while investigating price transmission, and will be used for the development of different empirical models in the next chapters. The descriptive analysis of the dataset concludes the chapter. Some key facts that emerge are the higher volatility of the world price, if compared to the European one; and the fact EU prices show a constant decrease over time, while the world ones increase again after 1993. 74
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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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Page 24 and 25: 3 EMPIRICAL TESTS FOR SPATIAL PRICE
Page 26 and 27: Empirical Tests for Spatial Price A
Page 32 and 33: = β 2 i0 Empirical Tests for Spati
Page 48 and 49: ∆p + t ∑ ⎡β⎤ ' ⎡ p t =
Page 54 and 55: 4 INTERNATIONAL SOFT WHEAT MARKETS
Page 56 and 57: International Soft Wheat Markets Un
Page 58 and 59: 30.000 20.000 10.000 0 1961 1963 19
Page 70 and 71: 250 200 150 100 50 1978:12 Internat
Page 76 and 77: 5 EMPIRICAL ANALYSIS: COINTEGRATION
Page 78 and 79: Empirical Analysis: Cointegration M
Page 82 and 83: α LM test ARCH(13) Empirical Analy
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Page 110: Empirical Analysis: Cointegration M
Page 113 and 114: Concluding Remarks These models rep
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
Page 122: References Thompson, S. R., Sul, D.
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Annexes 124 Annex A - Empirical ana
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Annexes METHODOLOGY DATA USED MAJOR
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Annexes Variable swfr 138 Annex B -
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Annexes Variable swfr 140 Table B.3
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Annexes 142 Table B.7 - Unit root t
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Annexes 144 Table C.5 - Cointegrati
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Annexes 146 Table D.4 - Unit root t
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Annexes 148 Annex E - Unit root tes
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Annexes Table E.5 - Unit root tests
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The notion of “price transmission
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