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Wheat market integration between Hungary and Germany

  • Bakucs, Lajos Zoltan
  • Brümmer, Bernhard
  • von Cramon-Taubadel, Stephan
  • Ferto, Imre

One of the most important targets of the Common Agricultural Policy (CAP) is to facilitate the spatial integration of agricultural markets within the individual member states as well as within the Community. On a spatially integrated market, price information should freely flow between member states. According to the European Commission, national Governments and their regulations should help to attain the goal of a common, integrated, and efficient market. For a small open economy, such as Hungary, market efficiency, and market information flow has at least two important political consequences. The first one is the transmission of prices by some actors of the chain either vertically or spatially. This issue is quite relevant for Hungary, considering the structure of its agri-food market. The second problem relates to the national agricultural support system completing the CAP in the New Member States (NMS). This paper focuses on the first topic, by testing for price transmission between German and Hungarian producer prices. Given the changing nature of market conditions over the past five years, a flexible Markov- Switching model for price transmission is proposed and estimated for the analysis of price transmission between Hungarian and German wheat.

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File URL: http://purl.umn.edu/44171
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Paper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44171.

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Date of creation: 2008
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Handle: RePEc:ags:eaae08:44171
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  1. Perron, Pierre, 1997. "Further evidence on breaking trend functions in macroeconomic variables," Journal of Econometrics, Elsevier, vol. 80(2), pages 355-385, October.
  2. Candelon, Bertrand & Lütkepohl, Helmut, 2000. "On the reliability of chow type test for parameter constancy in multivariate dynamic models," SFB 373 Discussion Papers 2000,95, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. 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.
  4. Allan w. Gregory & Bruce E. Hansen, 1992. "residual-Based Tests for Cointegration in Models with Regime Shifts," Working Papers 862, Queen's University, Department of Economics.
  5. Philip J. Dawson & Ana I. Sanju�n & Ben White, 2006. "Structural Breaks and the Relationship between Barley and Wheat Futures Prices on the London International Financial Futures Exchange," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(4), pages 585-594.
  6. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
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