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Price Dynamics in the North American Wheat Market

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  • Baek, Jungho
  • Koo, Won W.

Abstract

Perron's test, Johansen cointegration analysis, and a vector error-correction (VEC) model are used to identify structural change, as well as to examine price dynamics in the U.S. and Canadian hard red spring (HRS) and durum wheat markets. It is found that, due to the U.S. Export Enhancement Program (EEP), price instability experienced in June 1986 has resulted in structural changes for Canadian HRS and durum prices. We also find that Canadian prices have significant effects on the determination of the U.S. prices in the North American wheat market.

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Bibliographic Info

Article provided by Northeastern Agricultural and Resource Economics Association in its journal Agricultural and Resource Economics Review.

Volume (Year): 35 (2006)
Issue (Month): 2 (October)
Pages:

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Handle: RePEc:ags:arerjl:10217

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Web page: http://www.narea.org/
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Related research

Keywords: Canadian wheat exports; durum wheat; hard red spring wheat; Johansen cointe-gration test; unit root test with a structural break; vector error-correction; Demand and Price Analysis; International Relations/Trade;

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References

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  1. Schroeder, Ted C. & Goodwin, Barry K., 1990. "Price Dynamics in International Wheat Markets," Staff Papers 118178, Kansas State University, Department of Agricultural Economics.
  2. Denis Kwiatkowski & Peter C.B. Phillips & Peter Schmidt, 1991. "Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root: How Sure Are We That Economic Time Series Have a Unit Root?," Cowles Foundation Discussion Papers 979, Cowles Foundation for Research in Economics, Yale University.
  3. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  4. Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
  5. Serena Ng & Pierre Perron, 1997. "Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power," Boston College Working Papers in Economics 369, Boston College Department of Economics, revised 01 Sep 2000.
  6. P. J. Dawson & Ana I. Sanjuán, 2006. "Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 101-116, 03.
  7. Koo, Won W. & Jin, Hyun Joung & Mattson, Jeremy W. & Taylor, Richard D. & Cho, Guedae, 2004. "Effects Of The Canadian Wheat Board On The U.S. Wheat Industry," Agribusiness & Applied Economics Report 23530, North Dakota State University, Department of Agribusiness and Applied Economics.
  8. Lavoie, Nathalie, 2002. "An Empirical Evaluation Of The Canadian Wheat Board'S Ability To Price Discriminate In Bread Wheat Exports," 2002 Annual meeting, July 28-31, Long Beach, CA 19646, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Universite de Montreal, Departement de sciences economiques.
  10. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
  11. Graham Elliott & Thomas J. Rothenberg & James H. Stock, 1992. "Efficient Tests for an Autoregressive Unit Root," NBER Technical Working Papers 0130, National Bureau of Economic Research, Inc.
  12. James Oehmke & David Schimmelpfennig, 2004. "Quantifying Structural Change in U.S. Agriculture: The Case of Research and Productivity," Journal of Productivity Analysis, Springer, vol. 21(3), pages 297-315, May.
  13. Bent Nielsen, 2000. "Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend," Econometric Society World Congress 2000 Contributed Papers 1494, Econometric Society.
  14. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  15. Mattson, Jeremy W. & Koo, Won W. & Baek, Jungho, 2005. "Effects Of The Duties On Canadian Hard Red Spring Wheat," Agribusiness & Applied Economics Report 23494, North Dakota State University, Department of Agribusiness and Applied Economics.
  16. Koo, Won W. & Mattson, Jeremy W., 2002. "U.S.-Canada Wheat Trade And Its Effects On U.S. Price And Income," Agribusiness & Applied Economics Report 23572, North Dakota State University, Department of Agribusiness and Applied Economics.
  17. Ghoshray, Atanu & Lloyd, Tim A., 2003. "Price Linkages In The International Wheat Market," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25852, International Association of Agricultural Economists.
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