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A Dynamic Model of U.S. Sugar-Related Markets: A Cointegrated Vector Autoregression Approach

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  • Babula, Ronald A.
  • Newman, Douglas
  • Rogowsky, Robert A.

Abstract

The methods of the cointegrated vector autoregression (VAR) model are applied to monthly U.S. markets for sugar and for sugar-using markets for confectionary, soft drink, and bakery products. Primarily a methods paper, we apply Johansen and Juselius' advanced procedures to these markets for perhaps the first time, with focus on achievement of a statistically adequate model through analysis of a battery of advanced statistical diagnostic tests and on exploitation of the system's cointegration properties through rank restrictions, statistically supported hypotheses test restrictions, and inference. The VEC model results illuminate the estimates of crucial policy-relevant market parameters that drive these markets, as well as the dynamic nature of the relationships linking these sugar-based markets.

Suggested Citation

  • Babula, Ronald A. & Newman, Douglas & Rogowsky, Robert A., 2006. "A Dynamic Model of U.S. Sugar-Related Markets: A Cointegrated Vector Autoregression Approach," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(2), pages 1-25, July.
    • Handle: RePEc:ags:jlofdr:9084
    DOI: 10.22004/ag.econ.9084
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    References listed on IDEAS

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    7. Babula, Ronald A. & Bessler, David A. & Payne, Warren S., 2004. "Dynamic Relationships Among U.S. Wheat-Related Markets: Applying Directed Acyclic Graphs to a Time Series Model," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(1), pages 1-22, April.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. 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.
    10. 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.
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    Cited by:

    1. Max Nielsen & Jos Smit & Jordi Guillen, 2009. "Market Integration of Fish in Europe," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 367-385, June.

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