The Effects of Various Policy Regimes in the Integration of North American Grain Markets

This paper examines the integration between U.S. and Canadian grain prices using cointegration and error correction approach. Price relationships are examined in four different subperiods: pre-NAFTA (January 1986 to December 1993), post-NAFTA (January 1994 to July 1999), pre-WGTA (January 1986 to July 1995) and post-WGTA (August 1995 to July 1999). A free trade agreement implemented in 1989 that later folded into NAFTA affected price integration in the North American grain market, but Canada's elimination of freight subsidies in 1995 strengthened it. Empirical results indicate that longterm relationships exist among the price series. Prices are found to be first-difference stationary and cointegrated during the four subperiods. However, cointegration analysis shows significant post-WGTA improvement in market integration, particularly in the speed at which the market adjusts to departures from its long-run equilibrium.     

What drives stock market integration? An analysis using agribusiness stocks

This article explores the drivers of regional stock market integration with a focus on the agribusiness sector across relevant regional trade blocs around the world. We implement panel cointegration models to analyze the stock indices of agribusiness firms in the Southern Common Market (MERCOSUR), European Union (EU), Asia‐Pacific Economic Cooperation (APEC), and North American Free Trade Agreement (NAFTA). Based on the literature on market integration and stock return pricing, we identify nine possible determinants of stock market integration, which we separate into three categories: individual market performance, macroeconomic conditions, and agricultural trade. In our analysis, we account for agriculture‐specific factors to control for possible structural shifts in financial markets regimes by including the two main commodity price bubbles during last 20 years. Our results show that most of the variables included in our categories have been important factors in promoting regional stock market integration. Moreover, integration among regional stock markets was strengthened by the implementation of trade agreements. This effect is stronger in trade blocs with fewer members, such as NAFTA and MERCOSUR, compared with larger and more heterogeneous blocs, such as the EU and APEC.     

Estimating the Degree of Market Integration

Existing tests of spatial market integration are commonly based on statistical criteria without an explicit link to an economic model of price determination. This article proposes new measures of market integration defined directly in terms of a well-known spatial price determination model and develops an econometric methodology for estimating these measures. Due to the intractability of the conditional density function of prices, we use indirect inference to estimate the model parameters and market integration measures. The methodology is illustrated with simulated data and is applied to soybean price data for the United States, Brazil, and the EU.     

Cross country maize market linkages in Africa: integration and price transmission across local and global markets

In order to study short‐run price shock propagation, we model twenty seven Sub‐Saharan Africa (SSA) domestic maize markets within a Global Vector Autoregression framework. The main purpose is to fully embed multilateral trade flows as a way to better structure local price transmission dynamics and interdependencies, and get a more comprehensive picture of food price shocks propagation. We found significant between‐country market contagion and prompt regional price shock propagation when trade connection exists. Yet, the integration of SSA domestic maize markets within the continent and with global markets remains generally weak. Furthermore, under regular market conditions, most local price series appear to be more responsive to regional neighbors than to global shocks.     

A TEST FOR PRICE INTEGRATION IN THE EC LAMB MARKET

The purpose of this paper is to test for price integration in the British-French markets for lamb in the period after the introduction of the EC sheepmeat regime in 1980. A Holmes-Hutton rank order procedure is used to determine if price changes in one market cause price changes in the other market and thus define an integrated market. Using weekly price data for the period 1983-86, the results indicate that the British-French lamb markets are integrated in that a price change in one market is fully reflected in price changes in the other. However, there is considerable lag time in response to price changes. This may be attributed to less than perfect substitution between the British and French product, to the ex post nature of the clawback provision that existed in the British price support system during the period of analysis, and to informal trade barriers.     

Tradable water saving certificates to improve urban water use efficiency: an ex‐ante evaluation in a French case study

This paper proposes a system of tradable Water Saving Certificates to improve the efficiency of water allocation between Drinking Water Utilities at river basin level. A market institutional set‐up, inspired from recent policy developments in the energy sector, is proposed. An original analytical price‐endogenous model is developed to simulate trade intensity, equilibrium price and efficiency gains in this urban water market. The economic model is implemented in a French case study using mathematical programming. It is used for conducting an ex‐ante evaluation of trade possibilities and efficiency gains, considering different spatial restrictions aimed at controlling environmental externalities. Our modelling exercise provides evidence of the benefits of the proposed Water Saving Certificate scheme.     

World market integration for export and food crops in developing countries: a case study for Mali and Nicaragua

Using a generalized error correction model, this article measures and compares market integration for export cash crops versus imported food crops for Mali and Nicaragua, and computes transmission elasticities between changes in the goods’ border and domestic prices. Both Mali and Nicaragua obtain the bulk of their export revenue from a particular agricultural commodity—cotton for Mali and coffee for Nicaragua—and both import the same key staple food of rice. To reap the economic gains from this trade specialization, the two countries’ agriculture must be well‐integrated into world markets. The two countries present an important policy contrast that affects their degree of world market integration and price transmission. In Mali, a parastatal enterprise controls its cotton industry, while Nicaragua has less state direction over agriculture. Reflecting this difference, the results show that for both its main export and import commodity, Nicaragua is more integrated into world markets and has higher price transmission than Mali. The results for Nicaragua also show much higher integration and price transmission for its main agricultural export (coffee) than its major import (rice).     

Linking of U.S. monetary policy and exchange rates to world soybean markets

The linkage between macroeconomic policies and agricultural commodity trade has become an important research issue of agricultural economists. This paper investigates the macroeconomic linkage of soybean trade competition between the exporting countries of the United States, Brazil, and Argentina in the EC-12 and Japan import markets. It is argued that U.S. monetary growth may have important impacts on the competitive position of U.S. soybean exports through exchange rates. Two relationships are investigated: (a) the effects of U.S. monetary growth on the agricultural trade weighted exchange rates, and (b) the responsiveness of agricultural commodity prices and U.S. exports to exchange rate movements. Results indicate that a weak dollar increases imports of soybeans and soymeal significantly which serves to increase the equilibrium world price and increase both U.S. and Brazil/Argentina exports in the long run. However, during periods of more expansionary U.S. monetary policy there is little evidence of significant increases in market share position for U.S. soybeans and soymeal in world markets.     

Do the EU countries import at the same price? The case of coffee

The establishment of the Economic and Monetary Union was expected to determine price convergence in the market of the European Union, leading to the equilibrium theorized by the law of one price. This article investigates prices convergence in the coffee market among European importers. Coffee is not only a tradable and traded good, but also one of the most valuable traded commodities. We account for different qualities of coffee in a hedonic regression model, which isolate and remove the effects of factors that might affect price dispersion. Adjusted import prices result to be significantly different between European Member States, and do not support the hypothesis of a deepening European market integration.     

Partial Market Liberalization and the Efficiency of Policy Reform: The Case of the European Dairy Sector

This article analyzes the efficiency of partial market liberalization and policy reform with an application to the European dairy sector. In a second best world, partial moves toward market liberalization are not always efficiency improving. We develop a general equilibrium model to investigate the efficiency implications of discrete changes in government policy. The analysis covers price and quantity instruments used in both domestic and trade policy. We derive simple conditions under which partial market liberalization is efficiency improving. We apply the approach to agricultural policy reform in the European dairy sector and identify market liberalization scenarios that are "not" efficiency improving.