Price Transmission in the Wheat Market in Algeria: Threshold Cointegration Approach

Soumeya Bekkis, Mohamed Amine Benmehaia and Ahcène Kaci

International Journal of Food and Agricultural Economics (IJFAEC), 2023, vol. 11, issue 01

Abstract: This paper employs threshold cointegration technique that allows for asymmetric adjust-ment towards a long-run equilibrium relationship in order to examine the relationship between international and domestic prices of wheat in Algeria. The short-run adjustments are also examined with asymmetric error correction models. The analysis is based on annual series of international and domestic wheat prices. The time interval for the study runs from 1965 to 2021 using official data from national and international official organizations. The results indicate that the price transmission between the domestic and international price level of wheat is asymmetric, especially in the presence of structural breaks. The asymmetric error correction model with threshold cointegration provides strong evidence supporting asymmet-ric price behavior. Increases in the international price of wheat are transmitted more quickly to domestic prices than declines, which exhibit the increased vulnerability of the domestic market to be reconsidered.

Keywords: Agricultural Finance; Crop Production/Industries; Demand and Price Analysis; Financial Economics; Marketing; Research Methods/Statistical Methods (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ijfaec:330862

DOI: 10.22004/ag.econ.330862

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