A Wavelet Analysis of Price Integration in Major Agricultural Markets

We use linear time series and wavelets approach to study the relationships between U.S. and international prices for corn, soybeans, and cotton. We then compare results obtained with each approach and verify that structural breaks discovered with wavelet analysis match those produced with subsequent...

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Bibliographic Details
Published in:Journal of agricultural and applied economics 2020-02, Vol.52 (1), p.117-134
Main Authors: Nigatu, Getachew, Adjemian, Michael
Format: Article
Language:English
Subjects:
Advantages
Agricultural commodities
Agricultural products
Cointegration analysis
Corn
Cotton
Derivatives
Economic models
Economics
Foreign exchange rates
Futures market
Hypotheses
International
Pricing
Soybeans
Studies
Time series
Variation
Wavelet analysis
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Summary:We use linear time series and wavelets approach to study the relationships between U.S. and international prices for corn, soybeans, and cotton. We then compare results obtained with each approach and verify that structural breaks discovered with wavelet analysis match those produced with subsequent partial-period cointegration analysis. We find little evidence that short-term fluctuations between domestic and international prices are stable, while long-term relationships for many price pairs experience distinct structural breaks. We further find that even though China is among the largest importers of U.S. agricultural products, its commodity prices share little or no relationship with those prevailing in U.S. markets.
ISSN:1074-0708
2056-7405
DOI:10.1017/aae.2019.35