the internationalisation of stock markets and the abolition of u k exchange control this paper aims to assess the impact of the abolition of u k exchange control on the degre of integration of u k and overseas stock markets using cointegration techniques we find that although there is no significant increase in the correlation of short run stock market returns for the united kingdom and certain overseas markets post 1979 there does appear to be a marked increase in the degree to which these markets move together in the long run after this date there appears to be no long run gain from diversification since cointegration of two variables implies that at least one of them can be used to help forecast the other our findings also imply the inefficiency of a number of stock markets

threshold effects in price transmission the case of brazilian wheat maize and soya prices recent studies into price transmission have recognized the important role played by transport and transaction costs threshold models are one approach to accommodate such costs we develop a generalized threshold error correction model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium we use monthly wheat maize and soya prices from the united states argentina and brazil to demonstrate this model classical estimation of these generalized models can present challenges but bayesian techniques avoid many of these problems evidence for thresholds is found in three of the five commodity price pairs investigated

distinguishing between equilibrium and integration in spatial price analysis this article introduces a new spatial price analysis methodology based on maximum likelihood estimation of a mixture distribution model incorporating price transfer cost and trade flow data this method permits differentiation between market integration and competitive market equilibrium and derivation of intuitive measures of intermarket tradability competitive market equilibrium perfect integration segmented equilibrium and segmented disequilibrium one can also use these estimates to derive semiparametric measures of time varying regime probabilities to track changing market conditions an application to trade in soybean meal among pacific rim economies demonstrates the usefulness of the method copyright 2002 oxford university press

food versus fuel an updated and expanded evidence abstract this paper replicates the study of zhang et al 2010 food versus fuel what do prices tell us energy policy 38 pp 445 451 we confirm the findings of the original paper that there was only a weak relationship between ethanol and food commodities in the period between march 1989 and july 2008 in addition we extend that study and examine the cointegration relationship between biofuels and related commodities for a considerably enlarged dataset 3 vs 1 market 26 vs 8 commodities analysis up till 2017 vs 2008 weekly vs monthly data frequency focusing on the biofuel markets of brazil the eu and the usa in the three separate periods before during and after the food crisis of 2007 and 2008 we show that studying the time variation of the relationships plays an essential role in their proper understanding our results help to clarify the wide extensive discussion about the role of biofuels prices in food shortages manifested particularly during the food crises in agreement with the original study we confirm that price series data do not support strong statements about biofuels uniformly serving as main leading source of high food prices and consequently the food shortages

correlations between biofuels and related commodities before and during the food crisis a taxonomy perspective abstract in this paper we analyze the relationships between the prices of biodiesel ethanol and related fuels and agricultural commodities with a use of minimal spanning trees and hierarchical trees to distinguish between short term and medium term effects we construct these trees for different frequencies weekly and monthly we find that in short term both ethanol and biodiesel are very weakly connected with the other commodities in medium term the biofuels network becomes more structured the system splits into two well separated branches a fuels part and a food part biodiesel tends to the fuels branch and ethanol to the food branch when the periods before and after the food crisis of 2007 2008 are compared the connections are much stronger for the post crisis period this is the first application of this methodology on the biofuel systems

bayesian estimation and selection of nonlinear vector error correction models the case of the sugar ethanol oil nexus in brazil nonlinear adjustment toward long run price equilibrium relationships in the sugar ethanol oil nexus in brazil is examined we develop generalized bivariate error correction models that allow for cointegration between sugar ethanol and oil prices where dynamic adjustments are potentially nonlinear functions of the disequilibrium errors a range of models are estimated using bayesian monte carlo markov chain algorithms and compared using bayesian model selection methods the results suggest that the long run drivers of brazilian sugar prices are oil prices and that there are nonlinearities in the adjustment processes of sugar and ethanol prices to oil price but linear adjustment between ethanol and sugar prices

measuring market integration in the presence of transaction costs a threshold vector error correction approach applied econometric analyses of market integration based on price data alone have been criticised because they neglect the role of transaction costs to meet this objection threshold vector error correction models are used threshold models can account for the effects of transaction costs in price transmission without directly relying upon information about these costs which are often unavailable it is argued that threshold models that are based on two thresholds provide results that are economically more intuitive than those obtained from one threshold models however to this point no adequate econometric test is available for threshold significance in a two threshold model such tests are only available for the one threshold model in this paper a restricted two threshold model is developed in which the significance of the thresholds can be tested this model is therefore amenable to economic interpretation and statistical inference the model is used to estimate market integration in the european pig market

crude oil corn ethanol nexus a contextual approach this paper offers a holistic study on the complex relationships between crude oil corn and ethanol during a turbulent period between 2006 and end of 2011 through a holistic mapping of the current market situation and a contextual analytical design we show that there exists a strong relationship between crude oil and corn markets on one side and crude oil and ethanol on the other however the price relationship between corn and ethanol was revealed to be less straightforward and is driven by the us government fuel policy furthermore the study indicates that corn markets have became more prone to volatility due to ethanol production especially when the demand for corn is high and or the crude oil prices are high enough to create a competitive market for ethanol

experimentation and job choice in this article we examine optimal job choices when jobs differ in the rate at which they reveal information about workers skills we then analyze how the optimal level of experimentation changes over a worker s career and characterize job transitions and wage growth over the life cycle using the dictionary of occupational titles merged with the national longitudinal survey of youth 1979 we then construct an index of how much information different occupations reveal about workers skills and document patterns of occupational choice and wage growth that are consistent with a trade off between information and wages

linear learning in changing environments abstract the decision maker receives signals imperfectly correlated with an unobservable state variable and must take actions whose payoffs depend on the state the state randomly changes over time in this environment we examine the performance of simple linear updating rules relative to bayesian learning we show that a range of parameters exists for which linear learning results in exactly the same decisions as bayesian learning although not in the same beliefs outside this parameter range we use simulations to demonstrate that the consumption level attainable under the optimal linear rule is virtually indistinguishable from the one attainable under bayes rule although the respective decisions will not always be identical these results suggest that simple rules of thumb can have an advantage over bayesian updating when more complex calculations are more costly to perform than less complex ones we demonstrate the implications of such an advantage in an evolutionary model where agents learn to learn

profit efficiency among basmati rice producers in pakistan punjab farm specific profit inefficiency among basmati rice producers was estimated from a variable coefficient profit frontier the mean level of inefficiency at farm resources and price levels was 28 with a wide range 5 87 average loss of profit was rs 1 222 per hectare socioeconomic factors related to profit loss were the farm household s education nonagricultural employment and a credit constraint institutional determinants of profit loss were a water constraint and the late application of fertilizer punjab wide benefits of increasing farmer s profit efficiency are large a 25 reduction in profit loss among basmati rice producers may generate over rs 240 million in extra profits each rice season rice is a major export commodity for pakistan generating about 2 5 billion pakistan rupees rs annually or 20 of foreign exchange earnings from commodity trade in the early 1980s two varieties dominate in pakistan s international trade in rice basmati 370 a high quality long grained aromatic variety and the medium long grained irri 6 distinct export markets exist for these rices over 90 of the basmati is exported to oil rich middle eastern nations while the mediumlong varieties are mainly marketed in southeast asia in 1983 the export price of basmati was about rs 7 900 per ton while the price of medium long grained varieties averaged rs 2 700 per ton pakistan has a comparative advantage in the international market for basmati but probably not for medium long grained rices azhar and mamhud historically pakistan had a near monopoly in international trade in basmati but now faces increased competition from thailand and the united states efferson therefore pakistan must strive to increase the efficiency of basmati production to retain its comparative advantage and competitive edge in foreign rice markets basmati 370 is a pure line selection made in

price dispersion and incomplete learning in the long run abstract in each period a seller chooses a price and the customer for that period buys either one unit or nothing the relationship between price and purchase probability is one of two linear functions it is shown that the seller behaving optimally does not necessarily learn which function is the actual relationship since there can be a positive probability of sequences of prices converging to the price at which the two functions give the same purchase probability

estimating the degree of market integration existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination this article proposes new measures of market integration defined directly in terms of a well known spatial price determination model and develops an econometric methodology for estimating these measures due to the intractability of the conditional density function of prices we use indirect inference to estimate the model parameters and market integration measures the methodology is illustrated with simulated data and is applied to soybean price data for the united states brazil and the eu copyright 2008 oxford university press

disaggregated energy consumption and gdp in taiwan a threshold co integration analysis abstract energy consumption growth is much higher than economic growth for taiwan in recent years worsening its energy efficiency this paper provides a solid explanation by examining the equilibrium relationship between gdp and disaggregated energy consumption under a non linear framework the threshold co integration test developed with asymmetric dynamic adjusting processes proposed by hansen and seo hansen b e seo b 2002 testing for two regime threshold cointegration in vector error correction models journal of econometrics 110 293 318 is applied non linear co integrations between gdp and disaggregated energy consumptions are confirmed except for oil consumption the two regime vector error correction models vecm show that the adjustment process of energy consumption toward equilibrium is highly persistent when an appropriately threshold is reached there is mean reverting behavior when the threshold is reached making aggregate and disaggregated energy consumptions grow faster than gdp in taiwan

rigid prices evidence from u s scanner data this paper uses over two years of weekly scanner data from two small us cities to characterize time and state dependence of grocers pricing decisions in these data the probability of a nominal adjustment declines with the time since the last price change even after controlling for heterogeneity across store product cells and replacing sale prices with regular prices we also detect state dependence the probability of a nominal adjustment is highest when a store s price substantially diers from the average of other stores prices however extreme prices typically reflect the selling store s recent nominal adjustments rather than changes in other stores prices

actively learning about demand and the dynamics of price adjustment by observing the quantity demanded at particular prices a firm may learn about the parameters of its demand curve in such an environment price changes obstruct the learning process by inducing additional noise the authors paper constructs a dynamic model where a price setting firm endogenously controls the speed of learning the model provides a possible explanation for price inertia as a stable pricing policy allows the firm to learn more rapidly which improves future expected profits furthermore even in the long run learning continues to affect the firm s optimal price copyright 1990 by royal economic society

learning about variable demand in the long run this paper studies the problem of a monopoly who is uncertain about the demand it faces and learns about it over time through its pricing experience the demand curve facing the monopoly is not constant it changes over time in a markovian fashion we characterize the monopoly s optimal policy and inquire how it differs from an informed monopoly s policy it turns out that even when the rate at which the demand varies is negligible the stationary probability with which the monopoly s policy deviates from its informed counterpart is nonnegligible as long as the discount factor is below 1

a cointegration analysis of agricultural energy and bio fuel spot and futures prices this article features an analysis of the cointegration relationships among agricultural commodity ethanol and cushing crude oil spot and future prices the use of grains for the creation of bio fuels has sparked fears that these demands are inflating food prices we analyse approximately 10 years of daily spot and futures prices for corn wheat sugar ethanol and oil prices from datastream for the period 19 july 2006 to 2 july 2015 the analysis features engle granger pairwise cointegration and partial cointegration pairs of series that are cointegrated are analysed using markov switching vecm and impulse response analysis which confirms that these markets have significant linkages that vary according to whether they are in low or high volatility regimes

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

the fuelwood market in greece an empirical approach abstract wood has been since ancient times the basic household heating medium nowadays wood remains the primary energy source in rural areas of developing countries mainly in africa in greece the domestic demand of fuelwood is relied mainly on the fuelwood domestic supply especially during the post war period the domestic supply satisfies adequately the domestic demand eliminating the role of imports the present study surveys the long run relationship between the fuelwood prices of different forest species in order to determine the role of the special market conditions in their price formation in addition the error correction model is estimated in order to survey the direction of the granger causality among the prices of the fuelwood forest species the implementation of the impulse response analysis and the variance decomposition confirmed that coniferous and beech fuelwood producer price may account for the volatility of the oak fuelwood producer price this result may contribute greatly to the conservation of oak forest an important carbon storage forest ecosystem

market integration and uncertainty the impact of domestic and international commodity price variability on rural household income and welfare in ghana and peru abstract we estimate rural household income uncertainties and welfare changes due to commodity price and production variability in ghana and peru under different scenarios for international and domestic market shocks uncertainties significantly affect the variability of household income especially for households that are specialised in the production of few commodities wider exposure to international markets would increase the income variability for producers of commodities that are subjected to stabilisation policies in ghana but would reduce the variability that rural households in peru face in terms of welfare rural households in both countries are expected to gain if fully exposed to international markets

price interrelationships in the vegetable and tropical oils market the relationship between vegetable and tropical oils prices is investigated utilizing a vector autoregressive approach despite the apparent similarities between these oil prices in terms of their general pattern of movement over time the relationships were not found to be strong enough to label them as cointegrated series further analysis indicates that substitution relationships appear to drive price movements in the short run while market based structural factors for each of the oils are important elements in the price formation process in the long run

cointegration and market integration an application to the indonesian rice market this article suggests improvements in the use of regression analysis to measure spatial market integration the procedure pioneered by ravallion is still widespread but is valid only under certain conditions of exogeneity the alternative offered here is an error correction mechanism which makes it possible to test for exogeneity as well as indicating the direction and strength of causality in price formation between markets the method is illustrated with data on rice prices in different parts of the indonesian market the results confirm among other things that supply sources are more important than demand sources in driving prices

the influence of proximity to market on bean producer prices in nicaragua transport costs are an important determinant of smallholder welfare in developing countries in particular transport costs influence the prices that smallholders receive for their produce we propose a simple way of quantifying this influence taking the example of bean producers in nicaragua we employ a hedonic price model to estimate the effects of a smallholder s proximity to markets on the prices that he she receives while controlling for other factors such as the volume and quality of beans sold we find that on average each additional minute of travel time reduces farm gate prices by 2 5 cents per quintal based on these results the annual income from bean sales of the average smallholder in our sample would increase by between 24 and 110 usd if travel time to markets were reduced by 25 estimates of this nature can make an important contribution to cost benefit assessments of infrastructure investments

how is the liberalization of food markets progressing market integration and transaction costs in subsistence economies we propose a modification of baulch s parity bounds model to measure the market integration of food markets in developing countries instead of extrapolating a single observation of transaction costs we estimate transaction costs predicted transaction costs compare well with survey data of traders probabilities of market regimes computed on the basis of predicted transaction costs fluctuate significantly and do not support fixed regime probabilities over time the probability of market integration with trade decreases consistently during food shortages increasing either the probability of no trade or loss making trade or the probability of profitable but unexploited trade opportunities the data further support a negative trend in market integration with trade

biofuel related price transmission literature a review abstract in this article an extensive review of the rapidly growing biofuel related time series literature is carried out the data used the modeling techniques and the main findings of this literature are discussed providing a review of this flourishing research area is relevant as a guidepost for future research this literature concludes that energy prices drive long run agricultural price levels and that instability in energy markets is transferred to food markets

testing market integration new approaches with case material from the west bengal food economy given the inferential dangers of received methods a new methodology is introduced to provide a sequence of tests using weekly spot prices to examine the dynamic relationship of market commodity prices in three locations in west bengal tests suggest that the markets are integrated but a lower degree of integration of paddy and rice prices is identified the hypothesis of full market integration is rejected structural and institutional factors which affect the specifics of performance are identified physical isolation the institutional complexity of marketing systems and contractual forms the polarisation of assets assets specificity the institutional control of information and price formation the underdevelopment of linked markets and the idiosyncratic implementation of state regulatory policy and auto regulatory responses enter the explanation

price formation in the german biodiesel supply chain a markov switching vector error correction modeling approach changing linkages between agricultural and energy markets have attracted considerable attention in research and policy discussions during recent years as one of the largest biofuel markets worldwide the german biodiesel market is of particular interest it has grown rapidly since the beginning of the new millennium with this growth being driven mainly by political interventions vertical price transmission channels along the biodiesel supply chain are analyzed in this study we examine the relationship between diesel and biodiesel prices and between rapeseed oil soy oil and biodiesel prices between 2002 and 2008 due to pronounced changes in market conditions and the policy framework a regime dependent markov switching vector error correction model is used the regimes are characterized by markedly different price adjustment behaviors before 2005 and from late 2007 onward a regime characterized by the strong orientation of biodiesel prices toward diesel prices dominates between 2005 and 2007 biodiesel and rapeseed oil prices are mutually interdependent frequent switches between the regimes of the price dynamics during this period indicate a high extent of uncertainty and instability in the market

the impact of diesel price on upstream and downstream food prices evidence from sao paulo abstract the literature on the transmission of oil price shocks to prices along the food supply chain has widely ignored how shocks upstream differ from downstream ones this article examines this issue by modelling upstream and downstream diesel price shocks along the nutritional high value food supply chain in sao paulo using a vector error correction approach and monthly data from july 2001 to december 2013 we estimate short run and long run dynamics in producer and retail prices of meat eggs dairy and fats oil due to changes in the average monthly price of diesel the results of the granger causality analysis show that the price of diesel cannot be used to predict the behaviour of producer prices in all the markets under study and the price of diesel predicts retail price only in the egg market this result is in line with the nature of price controls in brazil as of january 2002 the prices charged by distributors and retailers have been liberalized although wholesale prices of the derivatives including that of diesel continue to be set by the state oil company with the objective of controlling inflationary pressures the results of the response of food prices to diesel price shocks show a positive response of both upstream and downstream prices of egg and dairy products both upstream and downstream while the opposite direction occurs in the fat and meat markets albeit the initial positive shock of the producer price of meat the findings of the study show the important role of public policy in determining the nature of price transmission along the food supply chain

is there co movement of agricultural commodities futures prices and crude oil even though significant attempts have appeared in literature the current perception of co movement of commodity prices appear inadequate and static in particular we focus on price movements between crude oil futures and a series of agricultural commodities and gold futures a comparative framework is applied to identify changes in relationships through time and various cointegration methodologies and causality tests are employed our results indicate that co movement is a dynamic concept and that some economic and policy development may change the relationship between commodities furthermore we show that biofuel policy buffers the co movement of crude oil and corn futures until the crude oil prices surpass a certain threshold

trends and cycles in macroeconomic time series two structural time series models for annual observations are constructed in terms of trend cycle and irregular components the models are then estimated via the kalman filter using data on five u s macroeconomic time series the results provide some interesting insights into the dynamic structure of the series particularly with respect to cyclical behavior at the same time they illustrate the development of a model selection strategy for structural time series models

extracting a robust u s business cycle using a time varying multivariate model based bandpass filter we develop a flexible business cycle indicator that accounts for potential time variation in macroeconomic variables the coincident economic indicator is based on a multivariate trend cycle decomposition model and is constructed from a moderate set of us macroeconomic time series in particular we consider an unobserved components time series model with a common cycle that is shared across different time series but adjusted for phase shift and amplitude the extracted cycle can be interpreted as a model based bandpass filter and is designed to emphasize the business cycle frequencies that are of interest to applied researchers and policymakers stochastic volatility processes and mixture distributions for the irregular components and the common cycle disturbances enable us to account for the heteroskedasticity present in the data forecasting results are presented for a set of different specifications point forecasts from the preferred model indicate a future recession with the uncertainty over the business cycle growing quickly as the forecast horizon increases copyright 2010 john wiley sons ltd

on market integration and liberalisation method and application to ethiopia the article suggests further improvements in the methodology to analyse market integration it provides corrections to and methodological extensions of recent work in this journal it also presents a way of applying market integration techniques to the analysis of shocks such as market liberalisation and war the method is applied to the effects of liberalisation and the end of the civil war on food markets in ethiopia the conclusion is that liberalisation had important effects on the long run and short run integration of food markets

does asymmetry in price transmission exist in the rice market in sri lanka abstractthis study analyses asymmetry in price transmission between wholesale and retail rice markets in sri lanka using the threshold autoregressive model we found that the wholesale and the retail rice markets in sri lanka are integrated with price changes moving from the wholesale to the retail market however the price transmission process is asymmetric in particular price increases at the wholesale market transmit immediately to the retail market while price decreases transmit more slowly parameter stability test and follow up analysis indicated that the price transmission process is asymmetric only during periods of price surges suggesting that the rice market is not efficient during these periods

are output fluctuations transitory according to the conventional view of the business cycle fluctuations in output represent temporary deviations from trend the purpose of this paper is to question this conventional view if fluctuations in output are dominated by temporary deviations from the natural rate of output then an unexpected change in output today should not substantially change one s forecast of output in say five or ten years our examination of quarterly postwar united states data leads us to be skeptical about this implication the data suggest that an unexpected change in real gnp of 1 percent should change one s forecast by over 1 percent over a long horizon

learning about the arrival of sales abstract we analyse optimal stopping when the economic environment changes because of learning a primary application is optimal selling of an asset when demand is uncertain the seller learns about the arrival rate of buyers as time passes without a sale the seller becomes more pessimistic about the arrival rate when the arrival of buyers is not observed the rate at which the seller revises her beliefs is affected by the price she sets learning leads to a higher posted price by the seller when the seller does observe the arrival of buyers she sets an even higher price

evaluation of electricity saving potential in china s chemical industry based on cointegration new huadu business school ministry of education foundation 10jzd0018 10gbj013 basic research universities special foundation 2010221051 national social science foundation 09zd050

managing dynamic competition in many important high technology markets including software development data processing communications aeronautics and defense suppliers learn through experience how to provide better service at lower cost this paper examines how a buyer designs dynamic competition among rival suppliers to exploit learning economies while minimizing the costs of becoming locked in to one producer strategies for controlling dynamic competition include the handicapping of more efficient suppliers in procurement competitions the protection and allocation of intellectual property and the sharing of information among rival suppliers jel c73 d44 l10

market analysis methods are our enriched toolkits well suited to enlivened markets the past fifteen years have brought historic reduction of government intervention in agricultural markets in the developing world most economists and policy makers believe these reforms enliven markets previously fettered by excessive government authority nonetheless the impact of market oriented reforms on the spatial and intertemporal extent and the competitiveness of markets remains an inherently empirical question meanwhile there also have been major innovations in methods used to analyze markets and prices due largely to the rapidly emerging time series econometric literature agricultural economists toolkits have changed nearly as rapidly and dramatically as have developing economy markets but can these enriched toolkits answer the

repeated bargaining with persistent private information the paper analyses repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent but not fully permanent private information the size of the surplus being divided is specified as a two state markov chain with transitions that are synchronized with contract negotiation dates equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller because there is persistence in the markov chain generating the surplus a successful demand induces the seller to make another aggressive demand in the next negotiation since the buyer s acceptance reveals that the current surplus is large rejection of an aggressive demand on the other hand leads the seller to be pessimistic about the size of the surplus in the next contract so the seller makes a soft offer that is sure to be accepted then after several such offers have been accepted the seller is optimistic enough to again make an aggressive demand creating an information cycle an interesting feature of this cycle is that the soft price is not constant but declines as the cycle continues so as to offset the buyer s option value of re starting the cycle when the current state is bad an explicit mapping is given for the relationship between the basic parameters and the equilibrium prices and quantities in particular there is a closed form solution for the threshold belief that makes the seller indifferent between hard and soft offers

empirical investigation into spatial integration without direct trade comparative analysis before and after the establishment of the ethiopian commodity exchange this paper presents a comparative analysis of the spatial price cointegration of coffee markets in ethiopia in the pre and post ethiopian commodity exchange ecx era using the autoregressive distributed lag ardl cointegration framework the study takes into consideration a market condition in which government policy restricts arbitrage coffee trade between coffee producing areas using coffee price data from 1998 2013 and applying a bounds test approach and toda yamamoto granger causality test the study finds that the establishment of ecx has strengthened regional integration rather than a national harmony between producer markets we also find evidence that since the establishment of ecx an opportunity was created for high quality coffee to dominate price formation while also allowing lower quality coffee producing areas to establish themselves the study underlines the importance of market transparency and exchange of price information between producer markets

a survey of some recent econometric methods this survey is written mainly for the applied economist though we hope that the specialist econometrician will find something of interest too our aim has been to try to bring the applied worker as up to date as possible and in the process to improve the quality of applied work by providing access to the latest ideas in econometrics we have tried to describe and explain in a relatively non technical way the main developments that have taken place in the last ten years partly for reasons of space the survey is by no means exhaustive but it does cover a wide range of topics in both time series and cross section analysis among the subjects covered are the followoing the nature of data including integrated and fractionally integrated data four estimation methods maximum likelihood method of moments m estimators and non parametric estimation inference with stationary and integrated regressors a comparison of various model evaluation principles the formulation of models including dynamic specification cointegration and conditional expectations in mean and variance copyright 1989 by royal economic society

price transmission analysis a flexible methodological approach applied to european pork and lamb markets the study of spatial price relationships helps to explain market performance and their degree of integration applying only one method of analysis may not be flexible enough to account for the complex interactions of prices in separated markets this paper complements usual cointegration tests with a description of dynamic features and patterns of causality among price series the method proposed is applied to study spatial pork and lamb prices relationships within the eu in the period 1988 1995 the results indicate that european markets for both commodities are integrated not only in the long run but in the short run as well although the price transmission process is more efficient in the porkmeat industry

spurious trend and cycle in the state space decomposition of a time series with a unit root abstract recent research has proposed the state space ss framework for decomposition of gnp and other economic time series into trend and cycle components using the kalman filter this paper reviews the empirical evidence and suggests that the resulting decomposition may be spurious just as detrending by linear regression is known to generate spurious trends and cycles in nonstationary time series a monte carlo experiment confirms that when data are generated by a random walk the ss model tends to indicate incorrectly that the series consists of cyclical variations around a smooth trend the improvement in fit over the true model will typically appear to be statistically significant these results suggest that caution should be exercised in drawing inferences about the nature of economic processes from the ss decomposition

optimal experimentation in a changing environment this paper studies optimal experimentation by a monopolist who faces an unknown demand curve subject to random changes and who maximizes profits over an infinite horizon in continuous time we show that there are two qualitatively very different regimes determined by the discount rate and the intensities of demand curve switching and the dependence of the optimal policy on these parameters is discontinuous one regime is characterized by extreme experimentation and good tracking of the prevailing demand curve the other by moderate experimentation and poor tracking moreover in the latter regime the agent eventually becomes trapped into taking actions in a strict subset of the feasible set

product aggregation market integration and relationships between prices an application to world salmon markets relationships between prices of goods offer motives of interest in at least two areas market integration and product aggregation there is a close relationship between market integration and aggregation which may increase the usefulness of market integration studies in this article these relationships are developed and illustrated by an application to the world salmon market it is shown that the law of one price holds for an international market with five salmon species this result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy

testing the rational expectations hypothesis further evidence this article tests the macro rational expectations hypotheses of rationality and neutrality for quarterly u s data the vector autoregressive representation is derived and the implied interequation nonlinear restrictions are tested using the wald statistic despite several modifications adopted here the results confirm the robustness of earlier findings that is the test results support rationality but not neutrality

long term contracting with markovian consumers to study how a firm can capitalize on a long term customer relationship we characterize the optimal contract between a monopolist and a consumer whose preferences follow a markov process the optimal contract is nonstationary and has infinite memory but is described by a simple state variable under general conditions supply converges to the efficient level for any degree of persistence of the types and along any history though convergence is history dependent in contrast as with constant types the optimal contract can be renegotiation proof even with highly persistent types these properties provide insights into the optimal ownership structure of the production technology

econometric models of asymmetric price transmission abstract in this paper we review the existing empirical literature on price asymmetries in commodities providing a way to classify and compare different studies that are highly heterogeneous in terms of econometric models type of asymmetries and empirical findings relative to the previous literature this paper is novel in several respects first it presents a detailed and updated survey of the existing empirical contributions on price asymmetries in the transmission mechanism linking input prices to output prices second this paper presents an extension of the traditional distinction between long run and short run asymmetries to new categories of asymmetries such as contemporaneous impact distributed lag effect cumulated impact reaction time equilibrium and momentum equilibrium adjustment path regime effect regime equilibrium adjustment path each empirical study is then critically discussed in the light of this new classification of asymmetries third this paper evaluates the relative merits of the most popular econometric models for price asymmetries namely autoregressive distributed lags partial adjustments error correction models regime switching and vector autoregressive models finally we use the meta regression analysis to investigate whether the results of asymmetry tests are not model invariant and find which additional factors systematically influence the rejection of the null hypothesis of symmetric price adjustment the main results of our survey can be summarized as follows i each econometric model is specialized to capture a subset of asymmetries ii each asymmetry is better investigated by a subset of econometric models iii the general significance of the f test for asymmetric price transmission depends mainly on characteristics of the data dynamic specification of the econometric model and market characteristics overall our empirical findings confirm that asymmetry in all its forms is very likely to occur in a wide range of markets and econometric models

the asymmetric business cycle abstract the business cycle is a fundamental yet elusive concept in macroeconomics in this paper we consider the problem of measuring the business cycle first we argue for the output gap view that the business cycle corresponds to transitory deviations in economic activity away from a permanent or trend level then we investigate the extent to which a general model based approach to estimating trend and cycle for the u s economy leads to measures of the business cycle that reflect models versus the data we find empirical support for a nonlinear time series model that produces a business cycle measure with an asymmetric shape across nber expansion and recession phases specifically this business cycle measure suggests that recessions are periods of relatively large and negative transitory fluctuations in output however several close competitors to the nonlinear model produce business cycle measures of widely differing shapes and magnitudes given this model based uncertainty we construct a mode

how policies affect international biofuel price linkages abstract we estimate the role of biofuel policies in determining which country is the price leader in world biofuel markets using a cointegration analysis and a vector error correction vec model weekly prices are analyzed for the eu us and brazilian ethanol and biodiesel markets in the 2002 2010 and 2005 2010 time periods respectively the us blender s tax credit and brazil s consumer tax exemption are found to play a role in determining the ethanol prices in other countries for biodiesel our results demonstrate that eu policies the consumer tax exemption and blending target tend to determine the world biodiesel price

the dynamic relationship between the prices of adrs and their underlying stocks evidence from the threshold vector error correction model this paper sets out to estimate the dynamic relationship that exists between the prices of adrs and their underlying stocks in both the short run and the long run using a number of recent developments of the threshold cointegration framework the empirical results support the notion of nonlinear mean reversion of the prices of adrs and their underlying stocks

forward exchange market unbiasedness the case of the australian dollar since 1984 abstract this paper implements a robust statistical approach to regression with non stationary time series the methods were recently developed in other work and are briefly exposited here they allow us to perform regressions in levels with non stationary time series data they accommodate data distributions with heavy tails and they permit serial dependence and temporal heterogeneity of unknown form in the equation errors with these features the methods are well suited to applications with frequently sampled exchange rate data which generally display all of these empirical characteristics our application here is to daily data on spot and forward exchange rates between the australian and us dollars over the period 1984 1991 following the deregulation of the australian foreign exchange market we find big differences between the robust and the non robust regression outcomes and in the associated statistical tests of the hypothesis that the forward rate is an unbiased predictor of the future spot rate the robust tests reject the unbiasedness hypothesis but still give the forward rate an important role as a predictor of the future spot rate

identifying price linkages a review of the literature and an application to the world market of cotton this paper reviews the literature of price linkages and examines the degree to which cotton prices are linked it also tests whether such linkages have improved over the last decade it concludes that the degree of linkage has improved over the last decade while the main source of this improvement appears to be a result of short run price transmission and to a lesser extent long run co movement

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

transfer costs spatial arbitrage and testing for food market integration conventional tests for food market integration ask often misleadingly whether prices in different locations move together in this paper an alternative methodology the parity bounds model pbm is developed which uses information on transfer costs in addition to food prices to assess the efficiency of spatial arbitrage monte carlo experiments using data generated by a point space spatial price equilibrium model show the pbm to be statistically reliable an application to philippine rice markets demonstrates that the pbm detects efficient arbitrage when other tests do not

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

does the law of one price really hold for commodity prices in spite of the empirical failure of the law of one price it is usually assumed that commodity prices are perfectly arbitraged at least in the long run this paper argues that this assumption is counterfactual and that much of the empirical evidence provided to support it is flawed and affected by econometric shortcomings spurious regressions nonstationarity in the data inappropriate use of first differences an alternative methodology co integration by which a long run relationship between nonstationary series can be tested is proposed tests of nonstationarity and co integration for a group of commodities show quite uniformly that the law of one price as a long run relationship fails and that deviations from the pattern are permanent

vegetable oil market and biofuel policy an asymmetric cointegration approach abstract the present paper analyses the long run relationship between vegetable oil prices and conventional diesel prices in the eu for the period 2005 2007 we applied recent developments in the threshold cointegration approach to investigate the presence of asymmetric dynamic adjusting processes between the prices of rapeseed oil sunflower oil and soybean oil and the price of a mineral oil diesel the results presented suggest a two regime threshold cointegration model only for the rapeseed oil diesel price pair thus the rapeseed oil price adjusts rapidly to its long run equilibrium determined by fossil diesel prices but this adjustment is asymmetric it differs if the divergence between the two prices is above or below a critical threshold consequently rapeseed oil appears particularly exposed to external shocks deriving from global political scenarios suggesting the reassessment of the high quota 80 of eu biodiesel represented by this vegetable oil

learning by doing and the value of optimal experimentation abstract recent research on learning by doing has provided the limit properties of beliefs and actions for a class of learning problems in which experimentation is an important aspect of optimal decision making however under these conditions the optimal policy cannot be derived analytically because bayesian learning about unknown parameters introduces a nonlinearity in the dynamic optimization problem this paper utilizes numerical methods to characterize the optimal policy function for a learning by doing problem that is general enough for practical economic applications the optimal policy is found to incorporate a substantial degree of experimentation under a wide range of initial beliefs about the unknown parameters dynamic simulations indicate that optimal experimentation dramatically improves the speed of learning and the stream of future payoffs furthermore these simulations reveal that a policy which separates control and estimation and does not incorporate experimentation frequently induces a long lasting bias in the control and target variables while these sequences tend to converge steadily under the optimal policy they frequently exhibit non stationary behavior when estimation and control are treated separately

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

testing for food market integration revisited this article considers the statistical performance of four commonly used econometric tests for market integration the law of one price the ravallion model cointegration and granger causality a spatial price equilibrium spe model that is subject to both production shocks and general price inflation and mimics many of the key characteristics of integrated food markets is constructed the model is used to generate food price time series of lengths that are typical of the short sample sizes available in most developing countries for both instantaneously integrated and independent markets a series of monte carlo experiments on these artificial food price time series are performed which show that all four of the conventional tests for market integration are statistically flawed

spatial market integration in the presence of threshold effects 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 a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders

forecasting economic time series with structural and box jenkins models a case study the basic structural model is a univariate time series model consisting of a slowly changing trend component a slowly changing seasonal component and a random irregular component it is part of a class of models that have a number of advantages over the seasonal arima models adopted by box and jenkins 1976 this article reports the results of an exercise in which the basic structural model was estimated for six u k macroeconomic time series and the forecasting performance compared with that of arima models previously fitted by prothero and wallis 1976

some further evidence on the law of one price the law of one price still holds international trade models often postulate the existence of a representative price i e the price which prevails at all markets this is known as the law of one price in this paper the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs the empirical evidence suggests that in most cases the law of one price cannot be rejected asa maintained hypothesis furthermore for the remaining cases transaction costs seem to cause the failure

spatial market arbitrage and threshold cointegration goodwin and piggott reported that corn and soybean prices in spatially separated markets in north carolina exhibited threshold cointegration and that commodity prices in different markets may persistently diverge here a multivariate approach is used to test for threshold cointegration and nonlinear cointegration the results suggest that departures from the law of one price do not persist indefinitely goodwin and piggott gp examined daily corn and soybean prices across spatially separated markets in north carolina and reported that bivariate pairings of prices were threshold cointegrated gp used a twothreshold model in which price differences across markets could persist indefinitely they concluded that empirical models should consider threshold effects in order to adequately characterize spatially integrated markets the purpose of this article is to extend the gp analysis in several directions gp employed the techniques of martens kofman and vorst which involve a multistepped search for thresholds in the residuals of a cointegrating regression this single equation search process is subject to potential misspecification so it is interesting to determine whether the direct multivariate test of threshold cointegration of hansen and seo provides confirmatory evidence in addition gp allowed two thresholds to affect each commodity pair without directly testing for the number of thresholds the second extension uses hansen tests to determine the number of thresholds two thresholds imply no arbitrage bounds that allow persistent departures from the law of one price one threshold is consistent with the traditional view that price differentials are fleeting as arbitrageurs drive excess returns to zero the final extension recognizes that spatially integrated markets might follow a nonlinear relationship that depends on transactions costs peter s sephton is professor school of business queen s university kingston ontario canada the author would like to thank nick piggott for providing his dataset and the dean s research fund in the school of business for financial assistance two anonymous referees provided helpful comments sufficiently large deviations from the law of one price should lead to a reduced price dispersion a direct test of nonlinear cointegration demonstrates that price differences tend to be resolved over time background