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Bulk commodities and the Liverpool and London markets of the mid-19th century

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  • James M. Nason
  • Donald G. Paterson
  • Ronald A. Shearer

Abstract

We study British prices and the degree of commodity market integration between Liverpool, the bulk commodity port of mid-19th century, and London. A new wholesale commodity price index is presented for Liverpool and this is compared with the Klovland-Sauerbeck index. Next, we examine the relationship between Liverpool and London markets in specific bulk commodities. Our data consist of price indices for identically described goods in both Liverpool and London: three commodity groups (metal products, wood products, and processed foods), and the specific commodities of wheat and flour. Tests for cointegration reveal convergence among the six price pairs. We also find that the markets were highly integrated in the short-run because three of the commodity group pairs (processed foods, wheat, and flour) shared common features or cycles. A common cycle implies that transitory price shocks in Liverpool had the same impact on prices in London and vice versa. The importance of the London and Liverpool common cycle to a shock is brief. Its shock explains less than 20 percent of the variation in the relevant price levels after twelve months, on average.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2003-29.

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Date of creation: 2003
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Handle: RePEc:fip:fedawp:2003-29

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  1. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  2. MacKinnon, James G, 1994. "Approximate Asymptotic Distribution Functions for Unit-Root and Cointegration Tests," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 167-76, April.
  3. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, December.
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  5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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  8. Vahid, F & Engle, Robert F, 1993. "Common Trends and Common Cycles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(4), pages 341-60, Oct.-Dec..
  9. 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.
  10. O'Rourke Kevin, 1994. "The Repeal of the Corn Laws and Irish Emigration," Explorations in Economic History, Elsevier, vol. 31(1), pages 120-138, January.
  11. O'Rourke, Kevin H & Taylor, Alan M & Williamson, Jeffrey G, 1996. "Factor Price Convergence in the Late Nineteenth Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 499-530, August.
  12. Calomiris, Charles W. & Schweikart, Larry, 1991. "The Panic of 1857: Origins, Transmission, and Containment," The Journal of Economic History, Cambridge University Press, vol. 51(04), pages 807-834, December.
  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  14. Engle, Robert F. & Issler, Joao Victor, 1995. "Estimating common sectoral cycles," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 83-113, February.
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