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Spatial Price Adjustment with and Without Trade

Oxford Bulletin of Economics and Statistics, Forthcoming

Posted: 20 May 2011 Last revised: 24 May 2011

Emma C. Stephens

Pitzer College

Ed Mabaya

Cornell International Institute for Food, Agriculture and Development

Stephan Cramon-Taubadel

University of Goettingen (Gottingen)

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Multiple version iconThere are 2 versions of this paper

Date Written: November 1, 2010

Abstract

In this paper we investigate the possibility that price transmission between spatially distinct markets might vary during periods with and without physical trade flows. We are able to test for differences in price transmission between trade and non-trade regimes by using Generalized Reduced Rank Regression (GRRR) techniques suggested by P.R. Hansen (2003). We apply these techniques to semi-weekly price and trade flow data for tomato markets in Zimbabwe and find that intermarket price adjustment occurs in both trade and non-trade periods. Indeed, the adjustments are generally larger and more rapid in periods without physical trade flows. This finding underscores the importance of information flow for market performance.

Keywords: Spatial price transmission, cointegration, Zimbabwe, reduced rank regression, tomatoes

JEL Classification: Q13, R12, C32, P42

Suggested Citation

Stephens, Emma C. and Mabaya, Ed and Cramon-Taubadel, Stephan and Barrett, Christopher B., Spatial Price Adjustment with and Without Trade (November 1, 2010). Oxford Bulletin of Economics and Statistics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1845605

Emma C. Stephens

Pitzer College ( email )

1050 North Mills Avenue
Claremont, CA 91711
United States

Edward Mabaya

Cornell International Institute for Food, Agriculture and Development ( email )

248 Warren Hall
Ithaca, NY 14853
United States
+1 6467200085 (Fax)

Stephan Cramon-Taubadel

University of Goettingen (Gottingen) ( email )

Platz der Göttinger Sieben 5
Göttingen, 37073
Germany

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

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