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Contemporaneous causal orderings of US corn cash prices through directed acyclic graphs

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  • Xiaojie Xu

    (North Carolina State University)

Abstract

This study investigates dynamic relationships among US corn cash prices for the years 2006–2011. Using daily data from 182 markets in seven Midwestern states, an error correction model is estimated and directed acyclic graphs characterize the contemporaneous causal relationships among prices from different states. Empirical results based on the PC algorithm show that three states, Iowa, Ohio, and Minnesota, dominate corn cash prices. Four potential causal paths among the three states also are identified. Given that physical flows of grain are different at different times of the year, the data are divided into storage periods and harvest periods, and a VAR in differences is adopted to model the price relationships. While Iowa and Ohio continue to dominate corn prices during the storage period, the causal flows are mixed during the harvest period. An application of the LiNGAM algorithm refines the results relative to those derived from the PC algorithm and reveals that Iowa, the leading corn-producing state, is the only state that dominates pricing over the crop year.

Suggested Citation

  • Xiaojie Xu, 2017. "Contemporaneous causal orderings of US corn cash prices through directed acyclic graphs," Empirical Economics, Springer, vol. 52(2), pages 731-758, March.
    • Handle: RePEc:spr:empeco:v:52:y:2017:i:2:d:10.1007_s00181-016-1094-4
    DOI: 10.1007/s00181-016-1094-4
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    More about this item

    Keywords

    Corn; Error correction model; Cointegration; Causality; Price discovery; Graph theory;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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