Spatial Market Integration in the Presence of Threshold Effects

Abstract

A large body of research has evaluated price linkages in spatially separate markets. Much recent research has applied models appropriate for nonstationary data. Such analyses have been criticized for their ignorance of transactions costs, which may inhibit price adjustments and thus affect tests of integration. This analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs. We evaluate daily price linkages among four corn and four soybean markets in North Carolina. Nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks. Our results confirm the presence of thresholds and indicate strong support for market integration, though adjustments following shocks may take many days to be complete. In every case, the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored. Copyright 2001, Oxford University Press.

The Turkish wheat market: spatial price transmission and the impact of transaction costs

“…This work triggered a number of studies, e.g., by Lo and Zivot (2001), Goodwin and Harper (2000), and Goodwin and Piggott (2001),identifying significant transaction costs in market integration. Brosig et al 2007 observe a decrease of transaction costs over time in Northeast China's soy bean markets suggesting improvement of market conditions.…”

Are current EU cereal prices correlated?

“…For instance, Goodwin and Piggott (2001) on corn and soya in North Carolina; Serra et al (2006) looked to the US egg market; Ben-Kaabia and Gil (2007) have analysed price transmission in the Spanish lamb sector; Balcombe et al (2007) looked at Brazilian wheat, maize and soya prices; Brümmer et al (2009) at wheat and flour market in Ukraine; Hassouneh et al (2010) at Spanish bovine market and the BSE effect; Abdulai (2000) and AnkamahYeboah (2012) to the maize market in Ghana. Fackler and Goodwin (2001) indicated correlation coefficient as an "initial descriptive device" for studies on market integration.…”

Chocs de prix internationaux et transmission : cas du marché du riz au Burkina Faso

“…L'hypothèse de transmission asymétrique des prix a fait l'objet d'une attention particulière dans la littérature consacrée à l'économie agricole (voir Balke et Fomby, 1997;von Cramon-Taubadel, 1998;Abdulaï, 2000;Goodwin et Piggott, 2001). Cette hypothèse implique qu'en cas de choc de prix entraînant une déviation de l'équilibre excédant un certain seuil critique, les agents économiques agissent pour ramener le système à l'équilibre.…”