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Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation

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  • Stanley R. Thompson
  • Donggyu Sul
  • Martin T. Bohl

Abstract

We investigate the degree to which the wheat markets of France, Germany, and the United Kingdom are in spatial equilibrium and how reforms to the CAP affect the speed of convergence to the longrun relationship. Due to the interrelationship among these markets and the nonstationarity of our data we introduce a seemingly unrelated regression-augmented Dickey-Fuller and error correction methodology. We argue this methodology is more efficient than ordinary cointegration and error correction models. Empirically we find strong evidence of efficient spatial markets and conformity to the law of one price. Market liberalization reforms in the EU increased the comovement of domestic and world wheat prices; our post-Uruguay Round price transmission elasticity was 0.183. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 84 (2002)
Issue (Month): 4 ()
Pages: 1042-1053

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Handle: RePEc:oup:ajagec:v:84:y:2002:i:4:p:1042-1053

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Cited by:
  1. Jaebeom Kim, 2004. "Short run real exchange rate dynamics: a SUR approach," Applied Economics Letters, Taylor & Francis Journals, vol. 11(14), pages 909-913.
  2. Harvey, David R., 2004. "European Perspective On Market Integration," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico 16734, Farm Foundation.
  3. Lee, Dae-Seob & Kennedy, P. Lynn & Fletcher, Stanley M., 2006. "An Analysis of Latin American Peanut Trade," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.
  4. Chris Doucougliagos & Henry Haszler & Phillip Hone, 2007. "Spatial Pricing Efficiency in Fiji's Municipal Food Markets," Economics Series 2007_05, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  5. Federico, Giovanni, 2007. "Market integration and market efficiency: The case of 19th century Italy," Explorations in Economic History, Elsevier, vol. 44(2), pages 293-316, April.
  6. Goetz, Linde & Glauben, Thomas & Brummer, Bernhard, 2010. "How Did Policy Interventions In Wheat Export Markets In Russia And Ukraine During The Food Crisis 2007/2008 Influence World Market Price Transmission?," 50st Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93952, German Association of Agricultural Economists (GEWISOLA).
  7. Kok, Christoffer & Werner, Thomas, 2006. "Bank interest rate pass-through in the euro area: a cross country comparison," Working Paper Series 0580, European Central Bank.
  8. Stanley Thompson & P. Michael Schmitz & Nobuyuki Iwai & Barry Goodwin, 2004. "The real rate of protection: the income and insurance effects of agricultural policy," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1851-1858.
  9. S. Thompson & Y. Bae & M. Kniepert, 2010. "Agricultural policy regime change assessment: Austrian accession to the European union," Empirical Economics, Springer, vol. 39(1), pages 291-302, August.
  10. Rosa, Franco & Vasciaveo, Michela, 2012. "Volatility in US and Italian agricultural markets, interactions and policy evaluation," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122530, European Association of Agricultural Economists.
  11. Listorti, Giulia & Esposti, Roberto, 2012. "Horizontal Price Transmission in Agricultural Markets: Fundamental Concepts and Open Empirical Issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 1, April.

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