Campus Units

Economics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

7-2017

Journal or Book Title

Agricultural Economics

Volume

49

First Page or Article ID Number

1

Last Page

15

DOI

10.1111/agec.12393

Abstract

We examine the performance of the threshold cointegration approach, specifically Band-TVECM, to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices, because trade takes time. We find that, following a standard inference strategy, a large portion of three-regime cases are not identified as such. Results show that transfer costs are systematically underestimated, particularly in three-regime models. The speed of price transmission is also biased in three-regime models. Furthermore, inferences about occurrence of trade are poor, with estimated models suggesting far lower market integration than is true in the data generating process .

JEL Classification

C32, F17, Q11

Comments

This article is published as Lence, S. H., G. Moschini, and F. G. Santeramo. “Threshold Cointegration and Price Transmission when Expectations Matter.” Agricultural Economics . Posted with permission.

Copyright Owner

International Association of Agricultural Economists

Language

en

File Format

application/pdf

Available for download on Monday, July 01, 2019

Published Version

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