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A Dynamic Model of U.S. Sugar-Related Markets: A Cointegrated Vector Autoregression Approach

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  • Babula, Ronald A.
  • Newman, Douglas
  • Rogowsky, Robert A.

Abstract

The methods of the cointegrated vector autoregression (VAR) model are applied to monthly U.S. markets for sugar and for sugar-using markets for confectionary, soft drink, and bakery products. Primarily a methods paper, we apply Johansen and Juselius' advanced procedures to these markets for perhaps the first time, with focus on achievement of a statistically adequate model through analysis of a battery of advanced statistical diagnostic tests and on exploitation of the system's cointegration properties through rank restrictions, statistically supported hypotheses test restrictions, and inference. The VEC model results illuminate the estimates of crucial policy-relevant market parameters that drive these markets, as well as the dynamic nature of the relationships linking these sugar-based markets.

Suggested Citation

  • Babula, Ronald A. & Newman, Douglas & Rogowsky, Robert A., 2006. "A Dynamic Model of U.S. Sugar-Related Markets: A Cointegrated Vector Autoregression Approach," Journal of Food Distribution Research, Food Distribution Research Society, vol. 37(2), pages 1-25, July.
  • Handle: RePEc:ags:jlofdr:9084
    DOI: 10.22004/ag.econ.9084
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    File URL: http://ageconsearch.umn.edu/record/9084/files/37020035.pdf
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    References listed on IDEAS

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    1. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
    2. Granger, C. W. J. & Newbold, Paul, 1986. "Forecasting Economic Time Series," Elsevier Monographs, Elsevier, edition 2, number 9780122951831 edited by Shell, Karl.
    3. David A. Bessler, 1984. "An Analysis of Dynamic Economic Relationships: An Application to the U.S. Hog Market," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 32(1), pages 109-124, March.
    4. Hendry, David F, 1986. "Econometric Modelling with Cointegrated Variables: An Overview," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 201-212, August.
    5. repec:ags:joaaec:v:35:y:2003:i:3:p:483-495 is not listed on IDEAS
    6. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    7. Goodwin, Harold L., Jr. & McKenzie, Andrew M. & Djunaidi, Harjanto, 2003. "Which Broiler Part is the Best Part?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(3), pages 1-13, December.
    8. Goodwin, H.L. & McKenzie, Andrew M. & Djunaidi, Harjanto, 2003. "Which Broiler Part is the Best Part?," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 35(3), pages 483-495, December.
    9. Babula, Ronald A. & Bessler, David A. & Payne, Warren S., 2004. "Dynamic Relationships Among U.S. Wheat-Related Markets: Applying Directed Acyclic Graphs to a Time Series Model," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(1), pages 1-22, April.
    10. Charles Moss & Andrew Schmits, 2002. "Price behaviour in the US sweetener market: a cointegration approach," Applied Economics, Taylor & Francis Journals, vol. 34(10), pages 1273-1281.
    11. David A Bessler & Jian Yang & Metha Wongcharupan, 2003. "Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 1-33, February.
    12. Moss Charles B. & Schmitz Andrew, 2004. "Delineating the Relevant U.S. Sweetener Markets," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-19, January.
    13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    14. Babula, Ronald A. & Rich, Karl M., 2001. "A Time-Series Analysis Of The U.S. Durum Wheat And Pasta Markets," Journal of Food Distribution Research, Food Distribution Research Society, vol. 32(2), pages 1-19, July.
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    Cited by:

    1. Max Nielsen & Jos Smit & Jordi Guillen, 2009. "Market Integration of Fish in Europe," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 367-385, June.

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    Agribusiness;

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