The co-movement between cotton and polyester prices
The authors examine the price linkages among polyester (the dominant chemical fiber), cotton (the dominant natural fiber), and crude oil (the dominant energy commodity), based on monthly data between 1980 and 2002. The modeling framework incorporates several aspects of the unit root econometrics literature. They find that: a) There is strong co-movement between cotton and polyester prices, well above the co-movement observed between these two prices and prices of other primary commodities. b) Crude oil prices have a stronger effect on polyester prices compared with cotton prices. c) Price shocks originating in the polyester market are transmitted at much higher speed to the cotton market than vice-versa.
|Date of creation:||01 Mar 2005|
|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 & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Phillips, P.C.B., 1986.
"Understanding spurious regressions in econometrics,"
Journal of Econometrics,
Elsevier, vol. 33(3), pages 311-340, December.
- Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation for Research in Economics, Yale University.
- 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.
- Baffes, John & Shah, Anwar, 1994. "Causality and comovement between taxes and expenditures: Historical evidence from Argentina, Brazil, and Mexico," Journal of Development Economics, Elsevier, vol. 44(2), pages 311-331, August.
- Pier Giorgio Ardeni, 1989. "Does the Law of One Price Really Hold for Commodity Prices?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 661-669.
- Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, vol. 67(5), pages 942-48, December.
- Baffes, John, 2004. "Cotton : Market setting, trade policies, and issues," Policy Research Working Paper Series 3218, The World Bank.
- Frederic S. Mishkin, 1991.
"Is the Fisher Effect for Real? A Reexamination of the Relationship Between Inflation and Interest Rates,"
NBER Working Papers
3632, National Bureau of Economic Research, Inc.
- Mishkin, Frederic S., 1992. "Is the Fisher effect for real? : A reexamination of the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 195-215, November.
- Campbell, John & Shiller, Robert, 1987.
"Cointegration and Tests of Present Value Models,"
3122490, Harvard University Department of Economics.
- 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.
- John Y. Campbell & Robert J. Shiller, 1986. "Cointegration and Tests of Present Value Models," NBER Working Papers 1885, National Bureau of Economic Research, Inc.
- Deb, Partha & Trivedi, Pravin K & Varangis, Panayotis, 1996. "The Excess Co-movement of Commodity Prices Reconsidered," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 275-91, May-June.
- 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.
- Pindyck, Robert S. & Rotemberg, Julio., 1987.
"The excess co-movement of commodity prices,"
1969-87., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- John Baffes, 1991. "Some Further Evidence on the Law of One Price: The Law of One Price Still Holds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1264-1273.
- Baffes, John, 1994. "Does comovement among exchange rates imply market inefficiency?," Economics Letters, Elsevier, vol. 44(3), pages 273-280.
- Leybourne, S. Y. & Lloyd, T. A. & Reed, G. V., 1994. "The excess comovement of commodity prices revisited," World Development, Elsevier, vol. 22(11), pages 1747-1758, November.
- 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.
- 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.
- C. John McDermott & Alasdair Scott & Paul Cashin, 1999.
"The Myth of Comoving Commodity Prices,"
IMF Working Papers
99/169, International Monetary Fund.
- Paul Cashin & C John McDermott & Alasdair Scott, 1999. "The myth of co-moving commodity prices," Reserve Bank of New Zealand Discussion Paper Series G99/9, Reserve Bank of New Zealand.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- 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.
- Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier.
- Peter C.B. Phillips & Pierre Perron, 1986.
"Testing for a Unit Root in Time Series Regression,"
Cowles Foundation Discussion Papers
795R, Cowles Foundation for Research in Economics, Yale University, revised Sep 1987.
- Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
- Tom Doan, . "PPUNIT: RATS procedure to perform Phillips-Perron Unit Root test," Statistical Software Components RTS00160, Boston College Department of Economics.
- Corbae, Dean & Ouliaris, Sam, 1988. "Cointegration and Tests of Purchasing Power Parity," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 508-11, August.
- Palaskas, Theodosios B. & Varangis, Panos N., 1991. "Is there excess co-movement of primary commodity prices? A co-integration test," Policy Research Working Paper Series 758, The World Bank.
- Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3534. 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.