The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach

Barry Goodwin (), Matthew Holt and Jeffery P. Prestemon

MPRA Paper from University Library of Munich, Germany

Abstract: Market price dynamics for North American oriented strand board markets are examined. Specifically, the role of transactions costs are examined vis–`a–vis the law of one price. Weekly data for the January 3rd, 1995 through April 14th, 2006 period are used in the analysis. Nonlinearities induced by unobservable transactions costs are modeled by estimating smooth transition autoregressions (STARs). Results indicate that nonlinearity is an important feature of these markets and that the parity relationships implied by economic theory are generally supported by the STAR models. Implications for the efficiency of spatial market linkages are examined by estimating generalized impulse response functions.

Keywords: Law of one price, Oriented strand board, Nonlinear model; Smooth transition autoregression; Unit root tests (search for similar items in EconPapers)
JEL-codes: C22 C52 E30 Q23 (search for similar items in EconPapers)
Date: 2008-04-30
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Commodity Terms of Trade, Unit Roots, and Nonlinear Alternatives: A Smooth Transition Approach (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:9684

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