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Limited arbitrage in international wheat markets: threshold and smooth transition cointegration

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  • Mainardi, Stefano
Abstract
The strength of the adjustment towards arbitrage equilibrium can be expected to be somehow proportional to the extent of market price deviations from equilibrium. In this article, threshold and smooth transition cointegration models are applied to quarterly wheat prices of three major world suppliers over the period 1973–99. Results based on arranged autoregressions of the error term of a static regression do not prove to be robust. Although non‐linear models relying on a multivariate system approach yield partly contradictory results, the main evidence from the latter suggests a weakening, rather than an outright inaction, of the adjustment process in the inner regime.

Suggested Citation

  • Mainardi, Stefano, 2001. "Limited arbitrage in international wheat markets: threshold and smooth transition cointegration," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(3), pages 1-26.
    • Handle: RePEc:ags:aareaj:117471
    DOI: 10.22004/ag.econ.117471
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    2. Stewart, Hayden & Don, P. Blayney, 2011. "Retail Dairy Prices Fluctuate with the Farm Value of Milk," Agricultural and Resource Economics Review, Cambridge University Press, vol. 40(2), pages 201-217, September.
    3. David Ubilava, 2012. "Modeling Nonlinearities in the U.S. Soybean‐to‐Corn Price Ratio: A Smooth Transition Autoregression Approach," Agribusiness, John Wiley & Sons, Ltd., vol. 28(1), pages 29-41, January.
    4. William Hahn & Hayden Stewart & Donald P. Blayney & Christopher G. Davis, 2016. "Modeling price transmission between farm and retail prices: a soft switches approach," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 193-203, March.
    5. Pede, Valerien O. & Valera, Harold Glenn A. & Alam, Mohammad Jahangir & McKenzie, Andrew M., 2013. "Nonlinearities in Regional Rice Prices in the Philippines: Evidence from a Smooth Transition Autoregressive (STAR) Approach," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150246, Agricultural and Applied Economics Association.
    6. Bekkis, Soumeya & Benmehaia, Mohamed Amine & Kaci, Ahcène, 2023. "Price Transmission in the Wheat Market in Algeria: Threshold Cointegration Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 11(1), January.
    7. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    8. Byeong-il, Ahn & Lee, Hyunok, 2015. "Vertical Price Transmission of Perishable Products: The Case of Fresh Fruits in the Western United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(3), pages 1-20, September.
    9. Barry K. Goodwin & Matthew T. Holt & Jeffrey P. Prestemon, 2021. "Semi-parametric models of spatial market integration," Empirical Economics, Springer, vol. 61(5), pages 2335-2361, November.

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