Spatial Analysis of Market Linkages in North Carolina Using Threshold Autoregression Models with Variable Transaction Costs
In North Carolina, where soybeans and corn are the two primary crops, the recent increase in the demand for U.S. corn has triggered a shift of farm acreage from soybeans to corn, leading to a rapid rise in prices of both commodities. However, the rate of the price changes, as well as the price level, is significantly different in markets that are located in different parts of the state. This study extends the literature that examines linkages between spatially separated markets by using a threshold autoregressive model with a less restrictive assumption for estimating the transaction cost neutral band -- the band within which trade is not profitable. This generalization allows the neutral band of transactions costs to change according to various external factors, including fuel costs and seasonality. The estimation results indicate that for longer time series data, variable thresholds models statistically outperform the constant thresholds specification, and may provide a better representation of corn and soybean price data. Additionally, impulse response functions that use the asymmetric variable threshold model parameters indicate that the magnitude of the shock as well as the time-to-price-parity-equilibrium in the linked markets may be underestimated if a constant thresholds specification is implemented.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
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.:
- Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
- Goodwin, Barry K. & Holt, Matthew T. & Prestemon, Jeffery P., 2008.
"The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach,"
9684, University Library of Munich, Germany.
- Joseph V. Balagtas & Matthew T. Holt, 2009. "The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(1), pages 87-105.
- Potter, Simon M, 1995.
"A Nonlinear Approach to US GNP,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 10(2), pages 109-25, April-Jun.
- Christopher B. Barrett, 2001. "Measuring Integration and Efficiency in International Agricultural Markets," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 23(1), pages 19-32.
- Barry K. Goodwin & Nicholas E. Piggott, 2001.
"Spatial Market Integration in the Presence of Threshold Effects,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 83(2), pages 302-317.
- Goodwin, Barry K. & Piggott, Nicholas E., 1999. "Spatial Market Integration In The Presence Of Threshold Effects," 1999 Annual meeting, August 8-11, Nashville, TN 21489, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Nathan S. Balke & Thomas B. Fomby, 1992.
9209, Federal Reserve Bank of Dallas.
- Haesun Park & James Mjelde & David Bessler, 2007. "Time-varying threshold cointegration and the law of one price," Applied Economics, Taylor & Francis Journals, vol. 39(9), pages 1091-1105.
- Li, Jau-Rong & Barrett, Christopher B., 1999. "Distinguishing Between Equilibrium And Integration In Markets Analysis," Working Papers 14607, International Agricultural Trade Research Consortium.
- Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1993. "Nonlinear Dynamic Structures," Econometrica, Econometric Society, vol. 61(4), pages 871-907, July.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Obstfeld, Maurice & Taylor, Alan M., 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," Center for International and Development Economics Research (CIDER) Working Papers 233607, University of California-Berkeley, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ags:aaea09:49282. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.