Spatial Market Integration in the Presence of Threshold Effects
A large body of research has evaluated price linkages in spatially separate markets. Much recent research has applied models appropriate for nonstationary data. Such analyses have been criticized for their ignorance of transactions costs, which may inhibit price adjustments and thus affect tests of integration. This analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs. We evaluate daily price linkages among four corn and four soybean markets in North Carolina. Nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks. Our results confirm the presence of thresholds and indicate strong support for market integration, though adjustments following shocks may take many days to be complete. In every case, the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored. Copyright 2001, Oxford University Press.
Volume (Year): 83 (2001)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: |
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon M. Potter, 1993.
"A Nonlinear Approach to U.S. GNP,"
UCLA Economics Working Papers
693, UCLA Department of Economics.
- Obstfeld, Maurice & Taylor, Alan M., 1997.
"Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited,"
CEPR Discussion Papers
1672, C.E.P.R. Discussion Papers.
- Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Journal of the Japanese and International Economies, Elsevier, vol. 11(4), pages 441-479, December.
- Maurice Obstfeld & Alan M. Taylor, 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," NBER Working Papers 6053, National Bureau of Economic Research, Inc.
- Maurice Obstfeld and Alan M. Taylor., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Center for International and Development Economics Research (CIDER) Working Papers C97-088, University of California at Berkeley.
- Spiller, Pablo T. & Wood, Robert O., 1988. "The estimation of transaction costs in arbitrage models," Journal of Econometrics, Elsevier, vol. 39(3), pages 309-326, November.
- Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
- 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.
- Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
- Siklos, Pierre L. & Granger, Clive W.J., 1997.
"Regime-Sensitive Cointegration With An Application To Interest-Rate Parity,"
Cambridge University Press, vol. 1(03), pages 640-657, September.
- Siklos, P.L. & Granger, C.W.J., 1997. "Regime Sensitive Cointegration with an Application to Interest rate Parity," Working Papers 97-5, Wilfrid Laurier University, Department of Economics.
- Kling, Catherine L. & Sexton, Richard & Carman, Hoy, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," Staff General Research Papers 1609, Iowa State University, Department of Economics.
- Balke, Nathan S & Fomby, Thomas B, 1997.
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 627-45, August.
- Nathan S. Balke & Thomas B. Fomby, 1992. "Threshold cointegration," Research Paper 9209, Federal Reserve Bank of Dallas.
- Tom Doan, . "RATS programs to replicate Balke-Fomby threshold cointegration," Statistical Software Components RTZ00010, Boston College Department of Economics.
- Goodwin, Barry K. & Grennes, Thomas J., 1998. "Tsarist Russia and the World Wheat Market," Explorations in Economic History, Elsevier, vol. 35(4), pages 405-430, October.
- McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(02), December.
- Enders, Walter & Siklos, Pierre L, 2001.
"Cointegration and Threshold Adjustment,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 19(2), pages 166-76, April.
- Tom Doan, . "RATS programs to replicate Enders-Siklos(2001) JBES paper on threshold cointegration," Statistical Software Components RTZ00053, Boston College Department of Economics.
- Tom Doan, . "ENDERSIKLOS: RATS procedure to perform Enders-Siklos test for cointegration with threshold effect," Statistical Software Components RTS00064, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:83:y:2001:i:2:p:302-317. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.