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Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation

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  • Stanley R. Thompson
  • Donggyu Sul
  • Martin T. Bohl

Abstract

We investigate the degree to which the wheat markets of France, Germany, and the United Kingdom are in spatial equilibrium and how reforms to the CAP affect the speed of convergence to the longrun relationship. Due to the interrelationship among these markets and the nonstationarity of our data we introduce a seemingly unrelated regression-augmented Dickey-Fuller and error correction methodology. We argue this methodology is more efficient than ordinary cointegration and error correction models. Empirically we find strong evidence of efficient spatial markets and conformity to the law of one price. Market liberalization reforms in the EU increased the comovement of domestic and world wheat prices; our post-Uruguay Round price transmission elasticity was 0.183. Copyright 2002, Oxford University Press.

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  • Stanley R. Thompson & Donggyu Sul & Martin T. Bohl, 2002. "Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1042-1053.
  • Handle: RePEc:oup:ajagec:v:84:y:2002:i:4:p:1042-1053
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    File URL: http://hdl.handle.net/10.1111/1467-8276.00366
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    Cited by:

    1. S. Thompson & Y. Bae & M. Kniepert, 2010. "Agricultural policy regime change assessment: Austrian accession to the European union," Empirical Economics, Springer, vol. 39(1), pages 291-302, August.
    2. 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), issue 1, April.
    3. Lodovico Muratori & Susanne Fricke, 2017. "Spatial price transmission and trade policies: new evidence for agricultural products from selected sub-Saharan African countries with high frequency data," Jena Economic Research Papers 2017-006, Friedrich-Schiller-University Jena.
    4. Jaebeom Kim, 2004. "Short run real exchange rate dynamics: a SUR approach," Applied Economics Letters, Taylor & Francis Journals, vol. 11(14), pages 909-913.
    5. Stanley Thompson & P. Michael Schmitz & Nobuyuki Iwai & Barry Goodwin, 2004. "The real rate of protection: the income and insurance effects of agricultural policy," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1851-1858.
    6. Federico, Giovanni, 2007. "Market integration and market efficiency: The case of 19th century Italy," Explorations in Economic History, Elsevier, vol. 44(2), pages 293-316, April.
    7. Kok, Christoffer & Werner, Thomas, 2006. "Bank interest rate pass-through in the euro area: a cross country comparison," Working Paper Series 580, European Central Bank.
    8. Philipp Adämmer & Martin T. Bohl & Ernst-Oliver Ledebur, 2015. "Price Transmissions During Financialization and Turmoil: New Evidence from North American and European Agricultural Futures," CQE Working Papers 3815, Center for Quantitative Economics (CQE), University of Muenster.
    9. Rosa, Franco & Vasciaveo, Michela, 2012. "Volatility in US and Italian agricultural markets, interactions and policy evaluation," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122530, European Association of Agricultural Economists.
    10. Harvey, David R., 2004. "European Perspective On Market Integration," North American Agrifood Integration: Situation and Perspectives, May 2004, Cancun, Mexico 16734, Farm Foundation.
    11. Götz, Linde & Glauben, Thomas & Brümmer, Bernhard, 2013. "Wheat export restrictions and domestic market effects in Russia and Ukraine during the food crisis," Food Policy, Elsevier, vol. 38(C), pages 214-226.
    12. Djuric, Ivan, 2014. "Impact of policy measures on wheat-to-bread supply chain during the global commodity price peaks: The case of Serbia," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 76, number 76.
    13. Balcilar, Mehmet & Hammoudeh, Shawkat & Asaba, Nwin-Anefo Fru, 2015. "A regime-dependent assessment of the information transmission dynamics between oil prices, precious metal prices and exchange rates," International Review of Economics & Finance, Elsevier, vol. 40(C), pages 72-89.
    14. Goetz, Linde & Glauben, Thomas & Brümmer, Bernhard, 2010. "How Did Policy Interventions In Wheat Export Markets In Russia And Ukraine During The Food Crisis 2007/2008 Influence World Market Price Transmission?," 50st Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93952, German Association of Agricultural Economists (GEWISOLA).
    15. Lee, Dae-Seob & Kennedy, P. Lynn & Fletcher, Stanley M., 2006. "An Analysis of Latin American Peanut Trade," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(01), April.

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