International price transmission on soft wheat markets: which role for policy variables in cointegration relationships?
AbstractThis paper aims at considering policy regimes while studying international price transmission mechanisms. The focus is on the soft wheat market between the United States and the European Union in the years 1978-2003. EU domestic and border policies are expected to play a strong role; a theoretical framework is developed in which the basic idea is that the intervention price acts as a threshold above which the EU and the US price can interact. A composite variable, equal to the maximum between the intervention and the US price, is then introduced in a cointegration model and its relation with the EU price is studied. In addition to this, other models are estimated, in which the adjustment coefficients and the parameters of the cointegrating vector are allowed to vary according to the policy regime in place. All models yield consistent results. The EU price reaction to the long run relations suggests that the role of the US price can be understood only if policy regimes are adequately accounted for. To which extent the US price adjusts to disequilibria requires further research.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 43843.
Date of creation: 2008
Date of revision:
International price transmission; Cointegration; Common Agricultural Policy; Agricultural and Food Policy; International Relations/Trade;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
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