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Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices

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  • P. J. Dawson
  • Ana I. Sanjuán

Abstract

This paper examines the long‐term relationship between the export prices of Canadian and US hard wheat and the effects of the US Export Enhancement Program (EEP). Using monthly prices for 1974–2001, we adopt the cointegration procedure of Johansen et al. (2000) which permits structural breaks. Results show that a long‐term relationship exists, and there are two breaks that coincide with the EEP. The first break is in late 1985 when the long‐term US/Canadian price ratio fell by 5.5%, while the second is in early 1995 when it increased by 9.2%. Weak exogeneity tests imply that Canada is the price leader, and impulse responses show that long‐term equilibrium is restored within five months following a shock to either price.

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  • P. J. Dawson & Ana I. Sanjuán, 2006. "Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices," Journal of Agricultural Economics, Wiley Blackwell, vol. 57(1), pages 101-116, March.
    • Handle: RePEc:bla:jageco:v:57:y:2006:i:1:p:101-116
    DOI: 10.1111/j.1477-9552.2006.00034.x
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    1. Hatanaka, Michio, 1996. "Time-Series-Based Econometrics: Unit Roots and Co-integrations," OUP Catalogue, Oxford University Press, number 9780198773535.
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    Cited by:

    1. Roberto Esposti & Giulia Listorti, 2013. "Agricultural price transmission across space and commodities during price bubbles," Agricultural Economics, International Association of Agricultural Economists, vol. 44(1), pages 125-139, January.
    2. Hamulczuk, Mariusz & Makarchuk, Oksana & Sica, Edgardo, 2019. "Searching for market integration: Evidence from Ukrainian and European Union rapeseed markets," Land Use Policy, Elsevier, vol. 87(C).
    3. Baek, Jungho & Koo, Won W., 2006. "Price Dynamics in the North American Wheat Market," Agricultural and Resource Economics Review, Cambridge University Press, vol. 35(2), pages 265-275, October.
    4. Xiaokang Hou & Shah Fahad & Peipei Zhao & Beibei Yan & Tianjun Liu, 2022. "The Trilogy of the Chinese Apple Futures Market: Price Discovery, Risk-Hedging and Cointegration," Sustainability, MDPI, vol. 14(19), pages 1-16, October.
    5. Peter Slade & Richard Gray, 2019. "Wheat stocks and the cointegration of wheat prices," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 67(1), pages 103-114, March.
    6. Kadir Eryigit & Suleyman Karaman, 2011. "Testing for spatial market integration and law of one price in Turkish wheat markets," Quality & Quantity: International Journal of Methodology, Springer, vol. 45(6), pages 1519-1530, October.
    7. Giulia LISTORTI, 2008. "Price Transmission Mechanisms: a Policy Investigation of International Wheat Markets," Working Papers 318, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    8. Listorti, Giulia & Esposti, Roberto, 2012. "Horizontal Price Transmission in Agricultural Markets: Fundamental Concepts and Open Empirical Issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 1(01), pages 1-28, April.

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