Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation

12 Pages Posted: 1 Apr 2020

See all articles by Stanley R. Thompson

Stanley R. Thompson

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics

Donggyu Sul

Independent

Martin Bohl

European University Viadrina Frankfurt (Oder)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2002

Abstract

We investigate the degree to which the wheat markets of France, Germany, and the United Kingdom are in spatial equilibrium and how reforms to the CAP affect the speed of convergence to the longrun relationship. Due to the interrelationship among these markets and the nonstationarity of our data we introduce a seemingly unrelated regression‐augmented Dickey‐Fuller and error correction methodology. We argue this methodology is more efficient than ordinary cointegration and error correction models. Empirically we find strong evidence of efficient spatial markets and conformity to the law of one price. Market liberalization reforms in the EU increased the comovement of domestic and world wheat prices; our post‐Uruguay Round price transmission elasticity was 0.183.

Keywords: error correction model, law of one price, policy regime change, spatial market equilibrium, Q110, Q170, Q180

Suggested Citation

Thompson, Stanley R. and Sul, Donggyu and Bohl, Martin, Spatial Market Efficiency and Policy Regime Change: Seemingly Unrelated Error Correction Model Estimation (November 2002). American Journal of Agricultural Economics, Vol. 84, Issue 4, pp. 1042-1053, 2002, Available at SSRN: https://ssrn.com/abstract=3565420 or http://dx.doi.org/10.1111/1467-8276.00366

Stanley R. Thompson (Contact Author)

Ohio State University (OSU) - Department of Agricultural, Environmental & Development Economics ( email )

2120 Fyffe Rd
Columbus, OH 43210-1067
United States

Donggyu Sul

Independent

Martin Bohl

European University Viadrina Frankfurt (Oder)

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