Bulk Commodities and the Liverpool and London Markets of the Mid-19th Century

Abstract

We study British commodity markets and the extent to which prices in these markets were integrated in the short-run and converged in the long-run. Our historical data is new. It consists of five price indices for identically described goods - iron products, wood products, processed foods, red wheat, and flour - in Liverpool, the bulk commodity port of mid-19th century Great Britain, and London. Tests for cointegration reveal long-run convergence among all the Liverpool-London price pairs. We also report that markets in processed food, red wheat, and flour were integrated in the short-run because they share a serially correlated common feature. This common feature implies that Liverpool and London prices responded to common cyclical shocks at the same moment in time. We find the impact of this shock is short-lived because the trend shock explains more than 80 percent of processed food and red wheat price fluctuations in Liverpool and London and Liverpool flour price movements.

Keywords: Liverpool, London, price indexes, markets, commodities, bulk trade, 19th century, wheat, flour, cointegration, cycles, co-features

JEL Classification: N13, N73, E31