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EU and World Agricultural Markets: Are They more Integrated after the Fischler Reform?

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  • Mela, Giulio
  • Canali, Gabriele

Abstract

This work uses cointegration techniques allowing for structural breaks to assess the extent to which the Fischler reform of the CAP increases price transmission elasticity (PTE) between the world and European corn, wheat, and soybean markets. Results show that the reform increased PTE in the case of corn and wheat, while its impact was negligible for soybeans. However, the long-term relationship (cointegration) between world and European prices can be detected only taking into account – other than the Fischler reform’s structural break – also the fact that world commodity markets were interested, in 2003-04 and 2007-08, by price bubbles. In particular the latter affected the world – European corn price relationship in the ascending phase, while the wheat and soybeans markets in the descending phase.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122480.

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Date of creation: 23 Feb 2012
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Handle: RePEc:ags:eaa123:122480

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Keywords: cointegration; structural breaks; agricultural commodity prices; Fischler CAP reform; Risk and Uncertainty; C22; Q02; Q18; O13.;

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  6. Radetzki, Marian, 2006. "The anatomy of three commodity booms," Resources Policy, Elsevier, vol. 31(1), pages 56-64, March.
  7. John Baffes & Bruce Gardner, 2003. "The transmission of world commodity prices to domestic markets under policy reforms in developing countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(3), pages 159-180.
  8. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  9. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
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