Nonlinearities in Regional Rice Prices in the Philippines: Evidence from a Smooth Transition Autoregressive (STAR) Approach
This paper investigates nonlinear dynamics in monthly rice prices of 16 regions in the Philippines at three levels: farm gate, wholesale and retail, over the period of January 1990 to December 2012. We used a series of tests to investigate whether the regional prices are characterized by linear processes or non-linear smooth transition autoregressive (STAR)-type dynamics. Results indicate that STAR-type nonlinearity exists in several regions, and particularly for farm gate prices. The most common process is a logistic STAR dynamic characterizing an asymmetric price behavior determined by two regimes and a smooth switching process.
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