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Testing Market Equilibrium: Is Cointegration Informative?

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  • McNew, Kevin
  • Fackler, Paul L.

Abstract

Cointegration methods are increasingly used to test for market efficiency and integration. The economic rationale for these tests, however, is generally unclear. Using a simple spatial equilibrium model to simulate equilibrium price behavior, it is shown that prices in a well-integrated, efficient market need not be cointegrated. Furthermore, the number of cointegrating relationships among prices is not a good indicator of the degree to which a market is integrated.

Suggested Citation

  • McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-17, December.
    • Handle: RePEc:ags:jlaare:30853
    DOI: 10.22004/ag.econ.30853
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    References listed on IDEAS

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