TESTING INTERNATIONAL PRICE TRANSMISSION UNDER ...

Empirical Analysis: Cointegration Models Accounting for Policy Regime Changes
(when they have the expected sign, i.e., positive, they are bounded between 0.002,
model 3, and 0.063, model 1b; when they are negative, they are bounded between
-0.069, model 4, and -0.007, model 1).
This could be due to its exogeneity in the system, as model 3 would imply; but,
also, the cointegration relation might be mostly driven by the intervention price
(as can be noted in model 2 and 4), which in turns brings some interpretative
problems. Indeed, the introduction of this threshold could explain why the US
price has a negative adjustment coefficient (see paragraph 5.2.2.1).
A final consideration concerns the reference period which has been used for the
analysis.
In this work, in order to study in depth the role of domestic and border policies
on price transmission, verifying the effects of the major changes they underwent
in the past years, the use of longer time series (Eurostat data), which would allow
to go back in time, has been preferred.
Unfortunately, this in turn implies the impossibility of using more recent data,
and of considering what has recently happened on world markets.
The current rise in food prices (figure 5.3), which started in the summer of
2007, brought renewed interest in the debate on the appropriateness of agricultural
domestic and border policies. At the same time, these issues are also currently
discussed in the so-called “Health Check” of the CAP (European Commission,
COM(2007) 722, and COM(2008) 306/4). The Health Check debate has the
objective of completing the Fischler reform of 2003 and of establishing the new
set of rules which will hold up to 2013.
450
350
250
150
50
2000:01
2001:01
Figure 5.3 French and US prices in the last years
2002:01
2003:01
2004:01
Source: ISMEA; International Grains Council
2005:01
2006:01
French soft milling wheat
hrw
2007:01
2008:01
93