Nonlinear Price Transmission in Wheat Export Prices

Atanu Ghoshray

No 11/09, Department of Economics Working Papers from University of Bath, Department of Economics

Abstract: This paper attempts to model the price relationship between the major exporters of wheat. The motivation of such research is to reveal whether prices are integrated and whether potential nonlinearities in price adjustment exist. Given the perception that transactions costs may be highly variable in the wheat market, the paper aims to test for the presence of cointegration in the presence of smooth transition adjustment. The results conclude that the further the prices deviate from each other, the larger will be the arbitrage and substitution that will drive the prices close to each other. However, the results suggest that the arbitrage will be limited as the various wheat prices employed in this study may be linked to highly variable transactions costs or some other form of imperfect competition.

Keywords: price adjustment; estar; wheat; cointegration (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:eid:wpaper:15967

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