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The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach

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Author Info
Goodwin, Barry K.
Holt, Matthew T.
Prestemon, Jeffery P.

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Abstract

Market price dynamics for North American oriented strand board markets are examined. Specifically, the role of transactions costs are examined vis–`a–vis the law of one price. Weekly data for the January 3rd, 1995 through April 14th, 2006 period are used in the analysis. Nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions (STARs). Results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the STAR models. Implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9684.

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Date of creation: 30 Apr 2008
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Handle: RePEc:pra:mprapa:9684

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Related research
Keywords: Law of one price; Oriented strand board; Nonlinear model; Smooth transition autoregression; Unit root tests;

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Find related papers by JEL classification:
Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions

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  1. Bekkerman, Anton & Goodwin, Barry D. & Piggott, Nicholas E., 2009. "Spatial Analysis of Market Linkages in North Carolina Using Threshold Autoregression Models with Variable Transaction Costs," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49282, Agricultural and Applied Economics Association. [Downloadable!]
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