The integration of pigmeat markets in the eu evidence from a regular mixed vine Copula

Abstract

The objective of this work is to investigate the degree of integration of national pigmeat markets in the EU. This is pursued using monthly wholesale prices from seven major markets and the statistical tool of mixed R-vine copulas. The empirical results suggest that the markets considered do not constitute a great pool in which prices move, boom, and crash together. The markets of Belgium, Germany, and the Netherlands exhibit a higher degree of integration relative to the others, whereas the Italian market exhibits a lower degree of integration. Also, there is an indication that, in certain cases, the benefits of free trade may be unequally distributed between the trading partners.

Impact of trade liberalisation on dairy market price co‐movements between the EU, Oceania, and the United States

“…It is therefore essential that the conditional measures of co‐movement are presented in empirical studies. When under the condition of a third price, the co‐movement between two prices is found to decrease (increase), it is concluded that their interdependence was magnified (clouded) due to the third price (Aguiar‐Conraria and Soares ; Grigoriadis et al ). Hence R‐Vines may reveal aspects of co‐movement that standard bivariate copulas cannot capture.…”

“…Copulas provide an effective way to approach price transmission and thus to assess market integration. They possess certain attractive attributes: they allow the joint behaviour of stochastic processes to be modelled independently of their marginal distributions; they need not assume that marginal distributions belong to the same family; they are suitable for capturing both linear and non‐linear co‐movements; and they provide information about the degree as well as the structure of the co‐movement (Fermanian and Scaillet ; Grigoriadis et al ). Thus, copulas are highly appropriate for analysing co‐movement between stochastic processes.…”

“…Thus, copulas are highly appropriate for analysing co‐movement between stochastic processes. In the context of market integration, a high degree of price co‐movement, combined with symmetric and strictly positive co‐movement at the extremes of the joint distribution, highlights well‐integrated markets (Grigoriadis et al ).…”

“…Panagiotou and Stavrakoudis () use bivariate static copulas to determine whether product differentiation in the US pork market leads to asymmetric price co‐movements between certain pork cuts at the retail level. Similarly, Grigoriadis et al () employ the R‐Vine to evaluate the degree of integration in the pork markets of seven European countries.…”

“…Excluding Grigoriadis et al (), the previous studies employ bivariate copulas. However, multidimensional models are more appropriate when assessing spatial market integration, since R‐Vines may shed more light on the ways in which geographically separated markets are connected and therefore evaluate the success of policy initiatives pursuing market integration.…”