Detecting price links in the world cotton market
The authors examine the degree to which international cotton prices are linked and test whether such links have improved over the past decade. They conclude that the degree of linkage has improved over the past decade, in the short run largely as the result of short-run price transmission -- and to a lesser extent because of long-run comovement. Improvements in information technology have made it much easier for information about demand to be disseminated across markets, so changes in cotton prices attributable to a price shock in one place are soon transmitted to prices in other places. Moreover, many countries have liberalized their cotton subsectors, and in some countries the government's role has changed substantially. In East Africa, for example, cotton marketing and trade was handled entirely by government parastatals. Now Tanzania, Uganda, and Zimbabwe have liberalized their marketing and trade regimes, to varying degrees. In the former Soviet Union (FSU) cotton shipped from Central Asia to other parts of the FSU were considered part of domestic trade. Now cotton exports from Uzbekistan are the most important component of that country's foreign trade. With such changes, one should expect cotton prices to converge somewhat more in the long run. Price links between West Africa and Central Asia are much greater than between the United States and other markets -- in part because most West African and Central Asian cotton is exported, compared with only 40 percent of U.S. cotton (and 60 percent of Greek cotton). Prices in countries that export most of their cotton are more likely to converge than prices in countries where prices are subject to both domestic and international demand conditions. To improve price risk management, there should be future contracts other than those traded on the New York Cotton Exchange, which mostly serves domestic U.S. needs and is not used extensively by non-U.S. hedgers and speculators.
|Date of creation:||31 Jul 1998|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.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.:
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-76, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Alderman, Harold, 1993.
"Intercommodity Price Transmittal: Analysis of Food Markets in Ghana,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 55(1), pages 43-64, February.
- Alderman, Harold, 1992. "Intercommodity price transmittal : analysis offood markets in Ghana," Policy Research Working Paper Series 884, The World Bank.
- Southworth, V. Roy & Jones, William O. & Pearson, Scott R., 1979. "Food Crop Marketing in Atebubu, District, Ghana," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
- Peter C. B. Phillips & Mico Loretan, 1991.
"Estimating Long-run Economic Equilibria,"
Review of Economic Studies,
Oxford University Press, vol. 58(3), pages 407-436.
- Meese, Richard A, 1986. "Testing for Bubbles in Exchange Markets: A Case of Sparkling Rates?," Journal of Political Economy, University of Chicago Press, vol. 94(2), pages 345-73, April.
- Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
- Richardson, J. David, 1978. "Some empirical evidence on commodity arbitrage and the law of one price," Journal of International Economics, Elsevier, vol. 8(2), pages 341-351, May.
- Fortenbery, T. Randall & Zapata, Hector O., 1995.
"An Evaluation of Price Linkages Between Futures and Cash Markets for Cheddar Cheese,"
204126, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
- T. Randall Fortenbery & Hector O. Zapata, 1997. "An evaluation of price linkages between futures and cash markets for cheddar cheese," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 17(3), pages 279-301, 05.
- Stigler, George J & Sherwin, Robert A, 1985.
"The Extent of the Market,"
Journal of Law and Economics,
University of Chicago Press, vol. 28(3), pages 555-85, October.
- George J. Stigler & Robert A. Sherwin, 1983. "The Extent of the Market," University of Chicago - George G. Stigler Center for Study of Economy and State 31, Chicago - Center for Study of Economy and State.
- Goletti, Francesco & Babu, Suresh, 1994. "Market liberalization and integration of maize markets in Malawi," Agricultural Economics, Blackwell, vol. 11(2-3), pages 311-324, December.
- Phillips, P C B, 1987.
"Time Series Regression with a Unit Root,"
Econometric Society, vol. 55(2), pages 277-301, March.
- Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
- Tom Doan, . "PPUNIT: RATS procedure to perform Phillips-Perron Unit Root test," Statistical Software Components RTS00160, Boston College Department of Economics.
- Fafchamps, Marcel & Gavian, Sarah, 1996. "The Spatial Integration of Livestock Markets in Niger," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(3), pages 366-405, October.
- Pendell, Dustin L. & Schroeder, Ted C., 2004. "Spatial Market Integration In Regional Cattle Markets," 2004 Annual Meeting, June 30-July 2, 2004, Honolulu, Hawaii 36265, Western Agricultural Economics Association.
- West, Kenneth D., 1987.
"A standard monetary model and the variability of the deutschemark-dollar exchange rate,"
Journal of International Economics,
Elsevier, vol. 23(1-2), pages 57-76, August.
- Kenneth D. West, 1986. "A Standard Monetary Model and the Variability of the Deutschemark-DollarExchange Rate," NBER Working Papers 2102, National Bureau of Economic Research, Inc.
- Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
- Mundlak, Yair & Larson, Donald F, 1992. "On the Transmission of World Agricultural Prices," World Bank Economic Review, World Bank Group, vol. 6(3), pages 399-422, September.
- Garbade, Kenneth D & Silber, William L, 1983. "Price Movements and Price Discovery in Futures and Cash Markets," The Review of Economics and Statistics, MIT Press, vol. 65(2), pages 289-97, May.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Lutz, Clemens & van Tilburg, Aad & van der Kamp, Bertjan, 1995. "The Process of Short- and Long-Term Price Integration in the Benin Maize Market," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(2), pages 191-212.
- John Y. Campbell & Robert J. Shiller, 1986.
"Cointegration and Tests of Present Value Models,"
Cowles Foundation Discussion Papers
785, Cowles Foundation for Research in Economics, Yale University.
- Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
- Kling, Catherine L. & Sexton, Richard & Carman, Hoy, 1991.
"Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery,"
Staff General Research Papers Archive
1609, Iowa State University, Department of Economics.
- Richard J. Sexton & Catherine L. Kling & Hoy F. Carman, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 568-580.
- Faruqee, Rashid & Coleman, Jonathan R & Scott, Tom, 1997. "Managing Price Risk in the Pakistan Wheat Market," World Bank Economic Review, World Bank Group, vol. 11(2), pages 263-92, May.
- Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October.
- Goletti, Francesco & Babu, Suresh Chandra, 1994. "Market liberalization and integration of maize markets in Malawi," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 11(2-3), December.
- Protopapadakis, Aris & Stoll, Hans R, 1983.
" Spot and Futures Prices and the Law of One Price,"
Journal of Finance,
American Finance Association, vol. 38(5), pages 1431-55, December.
- Aris Protopapadakis & Hans R. Stoll, . "Spot and Futures Prices and the Law of One Price," Rodney L. White Center for Financial Research Working Papers 17-82, Wharton School Rodney L. White Center for Financial Research.
- S. Leavitt & M. Hawkins & M. Veeman, 1983. "Improvements to Market Efficiency through the Operation of the Alberta Pork Producers' Marketing Board," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 31(3), pages 371-388, November.
- Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1944. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.