Extreme dependence in price transmission analysis

Feng Qiu and James Rude

Applied Economics, 2016, vol. 48, issue 46, 4379-4392

Abstract: We propose a generalized procedure that combines conventional price transmission analysis with copula-based dynamic tail dependence, to examine price relationships under extreme conditions. This approach is used to examine Ukrainian wheat markets where export restrictions combined with price surges, 2006–2008 and 2010–2012, have contributed to a turbulent market. The results indicate that domestic prices were effectively insulated from world price shocks, but that a ‘rocket and feathers’ price relation held between domestic flour and wheat prices. These asymmetric price co-movements changed with the degree of restrictiveness of the export prohibitions.

Date: 2016
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DOI: 10.1080/00036846.2016.1158916

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