Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices

P. J. Dawson and Ana I. Sanjuán

Journal of Agricultural Economics, 2006, vol. 57, issue 1, pages 101-116

Abstract: This paper examines the long-term relationship between the export prices of Canadian and US hard wheat and the effects of the US Export Enhancement Program (EEP). Using monthly prices for 1974-2001, we adopt the cointegration procedure of Johansen "et al." (2000) which permits structural breaks. Results show that a long-term relationship exists, and there are two breaks that coincide with the EEP. The first break is in late 1985 when the long-term US/Canadian price ratio fell by 5.5%, while the second is in early 1995 when it increased by 9.2%. Weak exogeneity tests imply that Canada is the price leader, and impulse responses show that long-term equilibrium is restored within five months following a shock to either price. Copyright 2006 Blackwell Publishing Ltd.

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