The Co-Movement between Cotton and Polyester Prices

30 Pages Posted: 1 Apr 2005

See all articles by John Baffes

John Baffes

World Bank

Gaston Gohou

University of Maryland - Department of Economics

Date Written: March 2005

Abstract

This paper examines the price linkages among polyester (the dominant chemical fiber), cotton (the dominant natural fiber), and crude oil (the dominant energy commodity) based on monthly data between 1980 and 2002. The modeling framework incorporates several aspects of the unit root econometrics literature. We find that (i) there is strong co-movement between cotton and polyester prices, well above the co-movement observed between these two prices and prices of other primary commodities; (ii) crude oil prices have a stronger effect on polyester prices compared to cotton prices; (iii) price shocks originating in the polyester market are transmitted at much higher speed to the cotton market than vice-versa.

Suggested Citation

Baffes, John and Gohou, Gaston, The Co-Movement between Cotton and Polyester Prices (March 2005). World Bank Policy Research Working Paper No. 3534. Available at SSRN: https://ssrn.com/abstract=695383

John Baffes (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jbaffes

Gaston Gohou

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

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