Identifying price linkages: a review of the literature and an application to the world market of cotton

Baffes, John; Ajwad, Mohamed Ihsan

doi:10.1080/00036840010023788

Cited by 36 publications

(17 citation statements)

References 57 publications

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“…To deal with possible nonstationary issues with the price series and evaluate the adjustment process for price transmission, we use a single equation Generalized Error Correction Model (GECM) as first proposed by Hendry et al (1984), amply discussed by Banerjee et al (1990) and Banerjee et al (1993), and applied by Quiroz and Soto (1995), De Boef, (2001), and Baffes and Ajwad (2001), among many others. The GECM has a general autoregressive distributed lag structure, and as such is a direct transformation of an augmented distributed lagged (ADL) model (Banerjee et al, 1990).…”

Section: Methodsmentioning

confidence: 99%

“…To our knowledge, this is the first study to measure integration into world markets and compute price transmission elasticities (TEs) for coffee in Nicaragua and rice in Mali. Baffes and Ajwad (2001) have evaluated market integration and calculated TEs for cotton prices for the West African region as a whole. However, they do not cover Mali individually, nor do they examine the linkage between border and producer prices; rather, they measure the relationship between world and border prices.…”

Section: Introductionmentioning

confidence: 99%

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World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

Baquedano

Liefert

Shapouri

2011

Agricultural Economics

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Using a generalized error correction model, this article measures and compares market integration for export cash crops versus imported food crops for Mali and Nicaragua, and computes transmission elasticities between changes in the goods' border and domestic prices. Both Mali and Nicaragua obtain the bulk of their export revenue from a particular agricultural commodity-cotton for Mali and coffee for Nicaragua-and both import the same key staple food of rice. To reap the economic gains from this trade specialization, the two countries' agriculture must be well-integrated into world markets. The two countries present an important policy contrast that affects their degree of world market integration and price transmission. In Mali, a parastatal enterprise controls its cotton industry, while Nicaragua has less state direction over agriculture. Reflecting this difference, the results show that for both its main export and import commodity, Nicaragua is more integrated into world markets and has higher price transmission than Mali. The results for Nicaragua also show much higher integration and price transmission for its main agricultural export (coffee) than its major import (rice).JEL classifications: D40, F15, Q11, Q17

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Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

Baquedano

Liefert

Shapouri

2011

Agricultural Economics

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“…In general, for markets that are subject to policies, the speed of adjustment, as reflected by the error correction coefficients, was estimated to be relatively low. Although several authors stress that policies impede the extent of price transmission (see for example, Mundlak and Larson 1992, Quiroz and Soto 1993, Baffes and Ajwad 2001, Abdulai 2000, Sharma 2002, it should be noted that other reasons such as high transaction costs and other distortions may also be the cause of slow adjustment.…”

Section: B Policy Implications Of International Price Transmissionmentioning

confidence: 99%

Underlying Trends and International Price Transmission of Agricultural Commodities

Ghoshray

2011

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Atanu Ghoshray is a Lecturer in Economics at the University of Bath. The author thanks M.S. Gochoco-Bautista, S. Jha, and E. San Andres for insightful comments on an earlier version of the draft, and P. Quising for providing the data. This paper represents the views of the author, who accepts responsibility for any errors in the paper. The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. Terms of use: Documents in Asian DevelopmentThe ADB Economics Working Paper Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia's development and policy challenges; strengthen analytical rigor and quality of ADB's country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness.

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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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Identifying price linkages: a review of the literature and an application to the world market of cotton

Cited by 36 publications

References 57 publications

World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

Underlying Trends and International Price Transmission of Agricultural Commodities

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

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