Integration in the English Wheat Market 1770-1820
65 Pages Posted: 21 Jun 2013
Date Written: June 2013
Cointegration analysis has been used widely to quantify market integration through price arbitrage. We show that total price variability can be decomposed into: (i) magnitude of price shocks; (ii) correlation of price shocks; (iii) between-period arbitrage. All three measures depend upon data frequency, but between-period arbitrage is most affected. We measure variation of these components across time and space using English weekly wheat price data, 1770-1820. We show that conclusions about arbitrage are sensitive to the precise form of cointegration model used; different components behave differently; and different factors in terms of transport and information explain behaviour of different components. Previous analyses should be interpreted with caution.
Keywords: domestic trade, economic integration, England and Wales, grain markets, time-series cointegration, transport
JEL Classification: N73, Q11, R41
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