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On Price Dynamics in International Wheat Markets

Author

Listed:
  • Zohrabyan, Tatevik
  • Bessler, David A.

Abstract

Extending the previous work by Bessler et. al. (2003), this paper examines dynamic relationships in the international wheat markets by employing five different base (country) currencies and a basket of currency. The stable aggregate currency (SAC) is proposed as the basket currency to be used in examining wheat price dynamics as opposed to individual base currencies or other possible baskets. Employing directed acyclic graphs and standard moving average representations, we compare the results from the SAC currency to those from prices converted in five base currencies. The findings are dependent upon the base currency choice; however, in all cases Canada is the dominant power in affecting world wheat price, whereas, the price innovations pass through the U.S. and Australia to the rest of the world. Furthermore, Europe and Argentina are information “sinks” as they receive but do not transmit new information. A possible latent variable associated with wheat pricing in the European Union appears to mediate information flows between Europe and Argentina and between Europe and Australia. Given the stability and low correlation properties of SAC, it is proposed to use SAC when studying price dynamics across countries.

Suggested Citation

  • Zohrabyan, Tatevik & Bessler, David A., 2006. "On Price Dynamics in International Wheat Markets," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 137782, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare06:137782
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    File URL: http://purl.umn.edu/137782
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    References listed on IDEAS

    as
    1. Hovanov, Nikolai V. & Kolari, James W. & Sokolov, Mikhail V., 2004. "Computing currency invariant indices with an application to minimum variance currency baskets," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1481-1504, June.
    2. David A Bessler & Jian Yang & Metha Wongcharupan, 2003. "Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs," Journal of Regional Science, Wiley Blackwell, vol. 43(1), pages 1-33.
    3. David Bessler & James Kolari & Thein Maung, 2011. "Dynamic linkages among equity markets: local versus basket currencies," Applied Economics, Taylor & Francis Journals, vol. 43(14), pages 1703-1719.
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