Cotton market integration and the impact of China's new exchange rate regime

Ge, Yuanlong; Wang, H. Holly; Ahn, Sung K.

doi:10.1111/j.1574-0862.2010.00456.x

Cited by 22 publications

(15 citation statements)

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“…Miljkovic (2009) considers that, due to import bans, Canadian and U.S. livestock prices can be either integrated or separated from 1996 to 2004, and that high trade dependency of prices would cause fragility and prices would be more vulnerable to exogenous shocks that reduce trade flows. Ge, Wang, and Ahn (2010) test the integration relationship of China's cotton market with the international market, especially the United States, and find that a long-run integration relationship exists, and that price hostilities are similar. Furthermore, they assess for the first time the impact of a market-oriented exchange rate system on cotton futures prices.…”

Section: Literature Reviewmentioning

confidence: 99%

Price bubbles and market integration in global sugar futures markets

Huang

Xiong

2019

Journal of Applied Economics

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We use a Supremum Augmented Dickey-Fuller test to detect price bubbles in the world's most important sugar futures markets (ZCE, NYBOT, and LIFFE) from 2006 to 2017. Results show 19 bubbles with characteristics similar in quantity, duration, and price variation. We explore whether sugar futures prices in ZCE, NYBOT, and LIFFE are integrative in a full sample with an improved hybrid method of directed acyclic graphs and structural vector autoregression. Based on the bubble test, we examine market integration in the sugar futures markets during explosive and unexplosive episodes. We find the impact of price bubbles on market integration and explore the cause of price bubbles in a macro-economic environment. Empirical results show futures markets are more integrative when price bubbles occur. We find sugar futures price bubbles reflect supply and demand imbalance, market participants are extremely sensitive, and market information exchanges frequently during the bubble period. ARTICLE HISTORY

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Section: Literature Reviewmentioning

confidence: 99%

Price bubbles and market integration in global sugar futures markets

Huang

Xiong

2019

Journal of Applied Economics

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“…4 Researchers have examined the impact of Bt cotton adoption in China on global cotton trade (Anderson, Valenzuela, and Jackson, 2008;Fang and Babcock, 2003;Frisvold, Reeves, and Tronstad, 2006;Huang et al, 2004). Others have examined the effects of China's currency policy on global cotton markets (Ge, Wang, and Ahn, 2010;Pan et al, 2007), how the elimination of the Multi-Fiber Agreement affected China's role in global cotton markets (Audet, 2007;Li, Mohanty, and Pan, 2005;MacDonald et al, 2010;Mutuc et al, 2011), and how China's WTO accession affected global cotton trade (Fang and Babcock, 2003;Fuller et al, 2003). A recent study has also considered the global recession and China's cotton supply chain (Xiao, 2010).…”

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confidence: 99%

Do U.S. Cotton Subsidies Affect Competing Exporters? An Analysis of Import Demand in China

Muhammad

McPhail

Kiawu

2012

J. Agric. Appl. Econ.

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We estimate the demand for imported cotton in China and assess the competitiveness of cotton-exporting countries. Given the assertion that developing countries are negatively affected by U.S. cotton subsidies, our focus is the price competition between the United States and competing exporters (Benin, Burkina Faso, Chad, Mali, India, and Uzbekistan). We further project how U.S. programs affect China's imports by country. Results indicate that if U.S. subsidies make other exporting countries worse off, this effect is lessened when global prices respond accordingly. If subsidies are eliminated, China's cotton imports may not fully recover from the temporary spike in global prices. Because cotton is one of the principal program crops in the United States, producers are eligible for the following types of government support: direct or decoupled payments, countercyclical payments based on target prices or revenue guarantees, marketing loan benefits, and crop revenue insurance.1 The United States has also administered other programs such as export credit guarantee programs (GSM-102 and GSM-103), the Supplier Credit Guarantee Program (SCGP), and user marketing certificates (Step-2 payments).2 It has been argued that these programs significantly impact world markets by depressing world prices through excess production and trade (Alston and Brunke, 2006;Alston, Sumner, and Brunke, 2007;Quirke, 2002).China is the most important destination market for global cotton exports. Since China's accession to the World Trade Organization in December 2001, its cotton imports increased from 56 million kg in 2001 to 3.6 billion kg by 2006, an increase of over 6,000%. This growth Andrew Muhammad is a senior research economist, Lihong McPhail is a research economist, and James Kiawu is an outlook economist with the U.S. Department of Agriculture, Economic Research Service, Market and Trade Economics Division, Washington, D.C.We thank three anonymous reviewers and the editor, Darrell Bosch, for their helpful comments.The views expressed in this article are those of the authors and may not be attributed to the Economic Research Service or the U.S. Department of Agriculture.1 See Schmitz, Rossi, and Schmitz (2007) for a description of how these programs specifically apply to the U.S. cotton sector. 2 Step 2 payments were made to exporters and domestic mills to compensate for their purchase of higher priced U.S. upland cotton. In 2004, a WTO dispute settlement panel found that Step 2 payments and export credit guarantees were inconsistent with WTO commitments. Consequently, the United States terminated Step

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“…Regarding cotton supply chains, research has shown that international cotton markets are well‐integrated (Baffes and Ajwad, ; Ge et al., ; Mutuc et al., ). However, evidence of integration between farm gate and international markets has been mixed.…”

Section: Literature Reviewmentioning

confidence: 99%

Price transmission, asymmetric adjustment and threshold effects in the cotton supply chain: a case study for Vidarbha, India

Shrinivas

Gómez

2016

Agricultural Economics

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This study examines price transmission asymmetries in Vidarbha's (India) cotton supply chain from 2002 to 2012. The analysis takes account of thresholds in price adjustments toward their long-run equilibrium. The first stage considers the price dynamics between international and Indian domestic cotton prices. The second stage considers price transmission from domestic to farm gate cotton prices in Vidarbha. Results from the first stage indicate that Indian and international cotton markets are well-integrated. In contrast, the second stage reveals significant threshold-type nonlinearities as well as asymmetries in price transmission between domestic and farm gate prices. The short-run dynamics suggest that the pass-through from domestic to farm gate prices is larger when domestic prices decrease than when they increase. Moreover, back of the envelope calculations suggest that the loss in revenue for a typical farmer from a decrease in domestic price is larger than the gains from an increase in domestic price of the same magnitude. The implication is that traders benefit from price fluctuations at the expense of farmers. Evidence from fieldwork in Vidarbha suggest that asymmetries revealed in this analysis may be linked to trader's market power and inadequate market information among farmers.JEL classifications: C32, Q17

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Cotton market integration and the impact of China's new exchange rate regime

Cited by 22 publications

References 42 publications

Price bubbles and market integration in global sugar futures markets

Price bubbles and market integration in global sugar futures markets

Do U.S. Cotton Subsidies Affect Competing Exporters? An Analysis of Import Demand in China

Price transmission, asymmetric adjustment and threshold effects in the cotton supply chain: a case study for Vidarbha, India

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