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International Market Integration Under Wto: Evidence In The Price Behaviors Of Chinese And Us Wheat Futures

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  • Du, Wen
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    Abstract

    China's 10-year old wheat futures market, the China Zhengzhou Commodity Exchange (CZCE) has been in stable development since establishment and is expected to be integrated to the world market after China joined WTO. This paper compares the price behavior of CZCE with that of the Chicago Board of trade (CBOT) in the US using ARCH/GARCH based univariate and multivariate time series models for the period between 1999 and 2003, around when China joined the World Trade Organization (WTO). Results show both markets can be modeled by an ARCH (1) or a GARCH (1,1), and the models have better fit when conditional error variance is t distributed. The price series in CZCE and CBOT are interrelated but not cointegrated. The existing interrelations between the two markets are significant and asymmetric, where CBOT holds a dominant position in the interactions while CZCE is more like a follower.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20115.

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    Date of creation: 2004
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    Handle: RePEc:ags:aaea04:20115

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    Keywords: integration; wheat; futures price; GARCH; China; Demand and Price Analysis; International Relations/Trade; G15; Q14;

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    1. 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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    4. David A Bessler & Jian Yang & Metha Wongcharupan, 2003. "Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 1-33.
    5. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Development Studies.
    6. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
    7. Yang, Jian & Leatham, David J., 1999. "Price Discovery In Wheat Futures Markets," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(02), August.
    8. Tomek, William G. & Myers, Robert J., 1993. "Empirical Analysis Of Agricultural Commodity Prices: A Viewpoint," Working Papers 6847, Cornell University, Department of Applied Economics and Management.
    9. Baillie, Richard T & Myers, Robert J, 1991. "Bivariate GARCH Estimation of the Optimal Commodity Futures Hedge," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(2), pages 109-24, April-Jun.
    10. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
    11. 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.
    12. Michael S. Haigh & Matthew T. Holt, 2000. "Hedging Multiple Price Uncertainty in International Grain Trade," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 881-896.
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    Cited by:
    1. Hossein-Yekani, Seyed-Ali & Bakhshoodeh, Mohammad, 2006. "The importance of developing future contracts: a case study of Iran Agricultural Commodity Exchanges," MPRA Paper 29593, University Library of Munich, Germany.

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