Spatial Price Adjustment with and without Trade*

Abstract

Cramon-Taubadel and Christopher B. Barrett. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

Implications of conceptual and data complexities on time-series econometric applications in market integration analysis

“…In a dynamic framework time series tools of varying levels of non-linear complexity have been applied in MI analysis to infer the extent and degree to which markets are integrated (see for example Brorsen et al, 1985;Kinnucan and Forker, 1987;von Cramon-Taubadel, 1998;Wohlgenant, 1999;Abdulai, 2000;Goodwin and Piggott, 2001;Meyer, 2004;Fackler and Tastan, 2008;Stephens et al, 2008;Moser et al, 2009;Butler and Moser, 2010). Based on the adjustment dynamics, these models have attempted to address issues of price transmission asymmetries, structural breaks, trend, transaction costs and threshold cointegration.…”

Spatial price transmission on agricultural commodity markets under different volatility regimes

“…Brosig et al (2011) argue that price adjustments can occur when traders readjust their price as a function of the other observed prices to avoid new entrants from arriving on the market. The study of Stephens et al (2012) shows that tomato prices in Zimbabwe adjust to their long term relationship even when there is no trade. These authors think that the link between trade and price adjustments is probably overstated in the literature at the expense of the information flow.…”

“…This facilitates the fixation of their transaction price. Following the assumptions of Pendell and Schroeder (2006), Brosig et al (2011), Ejrnaes and Persson (2010) and Stephens et al (2012), we guess that the information flow have a non-negligible role in the spatial price transmission. This is mainly supported by the fact that on agricultural commodity markets economic agents refer to a reference price to fix the price for their delocalized transaction.…”

“…If no trade occurs, there are no transmission effects. Stephens et al (2012) argue that the role of trade in spatial price transmission could be overstated in the literature at the cost of information. Hence, this paper postulates that spatial price transmission is more affected by the information flow than trade.…”

Transaction costs and trade liberalization: An empirical perspective from the MERCOSUR agreement

“…Although trade liberalization policies have historically promoted market integration of regions or countries, recent studies suggest that their effectiveness is negatively affected by the presence of transaction costs (TCs) (Listorti, 2009;Stephens et al, 2012). In fact, in order to maximize the benefits from trade liberalization policies, recent studies (Mitra and Josling, 2009;Martin and Anderson, 2011) argue that countries should take actions to identify and reduce sources of TCs between markets.…”