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Spatial market integration in the EU beef and veal sector: policy decoupling and export bans

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  • Ihle, Rico
  • Brümmer, Bernhard
  • Thompson, Stanley R.

Abstract

The 2003 reforms of the Common Agricultural Policy of the Euro-pean Union allowed for discretionary implementation among member states. Discretion was allowed with respect to the timing and the degree of decoupling of policy support. Differences among member states were particularly apparent in the European beef and veal sector. Using weekly data from 2003 to 2009, we assess the consequences of different national implementation strategies of the reforms on market integration for young calves, which are intensively traded in the European Union. Time series properties are analyzed with a range unit-root test after which a multivariate cointegration model is estimated. We find that the calf markets in Germany, France, the Netherlands and Spain are integrated and tightly interrelated as evidenced by both short and long-run price transmis-sion. We also find strong statistical support for the hypothesis that decoupling reduced calf price levels. Additionally, we ascertain that the outbreak of the Blue Tongue disease induced a structural change in parts of the EU calf market. Using counterfactual scenarios, we provide an indication of the cost involved with granting member states such a high degree of discretion in implementation. We conclude that the national markets studied here belong to a common market. --

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Bibliographic Info

Paper provided by Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE) in its series DARE Discussion Papers with number 0913.

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Date of creation: 2009
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Handle: RePEc:zbw:daredp:0913

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Keywords: 2003 CAP reform; calf market; decoupling; EU; market integration; price transmission;

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  1. David F. Hendry & Katarina Juselius, 2000. "Explaining Cointegration Analysis: Part 1," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 1), pages 1-42.
  2. Gregory, A.W. & Hansen, B.E., 1992. "Residual-Based Tests for Cointegration in Models with Regime Shifts," RCER Working Papers 335, University of Rochester - Center for Economic Research (RCER).
  3. Pesaran, M. Hashem & Shin, Yongcheol, 1996. "Cointegration and speed of convergence to equilibrium," Journal of Econometrics, Elsevier, Elsevier, vol. 71(1-2), pages 117-143.
  4. Lee, Kevin C. & Pesaran, M. Hashem, 1993. "Persistence profiles and business cycle fluctuations in a disaggregated model of U.K. output growth," Ricerche Economiche, Elsevier, Elsevier, vol. 47(3), pages 293-322, September.
  5. Gloria Gonz�lez-Rivera & Steven M. Helfand, 2001. "The Extent, Pattern, and Degree of Market Integration: A Multivariate Approach for the Brazilian Rice Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 83(3), pages 576-592.
  6. Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, Elsevier, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier.
  7. Felipe Aparicio & Alvaro Escribano & Ana E. Sipols, 2006. "Range Unit-Root (RUR) Tests: Robust against Nonlinearities, Error Distributions, Structural Breaks and Outliers," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(4), pages 545-576, 07.
  8. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198774501, October.
  9. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
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