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Dynamics Between Turkish and International Cotton Prices

Author

Listed:
  • Mustafa Safa Öz
  • Gökhan Özertan

Abstract

This study examines cotton prices in Turkey and how they relate to international prices. Given that Turkey imports 60 percent of its cotton from the United States, we use time-series techniques to investigate both short-run and long-run relationships between the Turkish (Ege), Memphis, and Liverpool A-index price series. We find, first, that the law of one price holds for both Ege-Memphis and Ege-Liverpool A-index comparisons. Second, there is no indication of price asymmetry between the Ege and international prices. Third, there is evidence for a bidirectional Granger causality relationship for both Ege-Memphis and Ege-A-index. The results are important for determining whether commodity markets are well integrated and adjust rapidly to price shifts, how prices in different countries adjust to shocks, how information flow patterns can be characterized among different markets, and how Turkey adjusts its prices in response to deviations in exporting countries, especially the United States.

Suggested Citation

  • Mustafa Safa Öz & Gökhan Özertan, 2013. "Dynamics Between Turkish and International Cotton Prices," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(S5), pages 180-193, November.
    • Handle: RePEc:mes:emfitr:v:49:y:2013:i:s5:p:180-193
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