Detecting threshold effects in price transmission


Book Description

The analysis of price transmission plays a key role in understanding markets integration. This helps identify the nature of the relationship between geographically distant markets and cross-commodity price transmission, as well as the impact of liberalization policies and the identification of regions exposed to systemic shocks. This technical note contributes to the debate between symmetric and asymmetric price transmission and proposes to present the traditional and new approaches for detecting threshold effects in price transmission while focusing on their advantages and limitations. There is no one-size-fits-all method to detect threshold effects in price transmission. Experts need to select a combination of elements (context of study, the economy under consideration, data availability…) to justify the relevancy of their choice. Beyond the presentation of the methods for detecting thresholds in price transmission, we perform an application in the case of the rice market in Senegal. The results support the evidence of an asymmetric price transmission between world and domestic prices in the short-run and a symmetric transmission in the long-run.




Threshold Effects in Price Transmission


Book Description

Recent studies into price transmission have recognized the important role played by transport and transaction costs. Threshold models are one approach to accommodate such costs. We develop a generalized Threshold Error Correction Model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium. We use monthly wheat, maize, and soya prices from the United States, Argentina, and Brazil to demonstrate this model. Classical estimation of these generalized models can present challenges but Bayesian techniques avoid many of these problems. Evidence for thresholds is found in three of the five commodity price pairs investigated.




Threshold Effects in Price Transmission


Book Description

Recent studies into price transmission have recognized the important role played by transport and transaction costs. Threshold models are one approach to accommodate such costs. We develop a generalized Threshold Error Correction Model to test for the presence and form of threshold behavior in price transmission that is symmetric around equilibrium. We use monthly wheat, maize, and soya prices from the United States, Argentina, and Brazil to demonstrate this model. Classical estimation of these generalized models can present challenges but Bayesian techniques avoid many of these problems. Evidence for thresholds is found in three of the five commodity price pairs investigated.




A dynamic spatial model of agricultural price transmission


Book Description

Spatial interactions are essential drivers of price transmission mechanisms and may significantly affect any food’s policy outcomes. However, spatial aspects seem to be generally overlooked when analyzing price transmission. This paper attempts to fill this gap by highlighting the usefulness of spatial interaction and models for market integration analysis. A spatial dynamic panel datamodel is presented and applied to Niger’s millet market. Empirical results show that (1) the millet market is partly integrated, (2) locally traded commodities (millet and sorghum) are linked by a cross-commodity price transmission, (3) most imported cereals prices, which for Niger is maize and rice, did not affect the millet market, and (4) no cross-regions price transmissionoccurred for the millet market.




Price Transmission Analysis in the Italian Feed Industry


Book Description

More than half of total production costs for dairy producers is represented by feed, whose price level strongly depends on maize price patterns. However, the literature paid no attention to this vertical price transmission dynamics. This paper tries to fill the gap by investigating the interrelationship between Italian maize and feed prices, proposing a novel two-regime threshold-cointegration model where regimes are triggered by an observable transition variable. The latter accounts for both fundamental and non-fundamental drivers that recent literature found to be potential triggers influencing the transmission process. Empirical results suggest that the impact of non-fundamentals, especially financialization and energy price, is quite weak, whereas market fundamentals still play a significant role in shaping the price transmission dynamics. Furthermore, the cointegration relationship is found to be non-continuous, with several interruptions.




The Transmission of Exchange Rate Changes to Agricultural Prices


Book Description

Movements in exchange rates can change the prices of goods faced by producers and consumers and thereby affect incentives to produce, consume, and trade goods. Exchange rate changes, however, might not be completely transmitted (passed through) to domestic prices. Price and exchange rate transmission for ag. products is low in most developing economies, partly because of trade policies but also because of inadequate infrastructure and other market deficiencies. During the last 20 years, developed and developing countries have moved away from support policies that impede price and exchange rate transmission toward trade policies that allow transmission, such as tariffs. However, market deficiencies remain as a cause of incomplete transmission. Illus.




Intelligent Environments 2021


Book Description

Intelligent environments (IE) combine physical spaces with ICT and pervasive technology to improve a user’s awareness of their surroundings, empower them to carry out tasks, enrich their experience, and enhance their ability to manage such environments. A growing community, from academia to practitioners, is working to bring intelligent environments to life. This work is driven by the innovative ideas and technological progress that are making the sensors and computing devices required for intelligent environments more affordable and energy-efficient. This book presents papers from Workshops held during the 17th International Conference on Intelligent Environments, IE2021. The conference was due to take place in Dubai, UAE, but was held as a virtual event from 21 to 24 June 2021 due to the restrictions associated with the Covid-19 pandemic. Included here are the proceedings of the 10th International Workshop on the Reliability of Intelligent Environments (WoRIE’21), the 3rd International Workshop on Intelligent Environments and Buildings (IEB’21), the 1st International Workshop on Self-Learning in Intelligent Environments (SeLIE’21), and the 1st International Workshop on Artificial Intelligence and Machine Learning for Emerging Topics (ALLEGET’21). The contributions to these workshops reflect the multi-disciplinary and transversal aspects of intelligent environments, and cover the latest research and development in intelligent environments and related areas, focusing on pushing the boundaries and contributing to the establishment of intelligent environments in the real world. Offering a state-of-the-art overview of current progress, the book will be of particular interest to all those working in the field of intelligent environments.




Agricultural Markets Instability


Book Description

Since the financial and food price crises of 2007, market instability has been a topic of major concern to agricultural economists and policy professionals. This volume provides an overview of the key issues surrounding food prices volatility, focusing primarily on drivers, long-term implications of volatility and its impacts on food chains and consumers. The book explores which factors and drivers are volatility-increasing and which others are price level-increasing, and whether these two distinctive effects can be identified and measured. It considers the extent to which increasing instability affects agents in the value chain, as well as the actual impacts on the most vulnerable households in the EU and in selected developing countries. It also analyses which policies are more effective to avert and mitigate the effects of instability. Developed from the work of the European-based ULYSSES project, the book synthesises the most recent literature on the topic and presents the views of practitioners, businesses, NGOs and farmers' organizations. It draws policy responses and recommendations for policy makers at both European and on international levels.




Non-Linear Price Transmission Between Gasoline Prices and Crude Oil Prices


Book Description

This paper analyses the adjustment of gasoline prices in response to shocks in crude oil prices. We show that the nature of the dynamic relationship between crude oil and gasoline prices changes in February 1999. For the pre-February 1999 and the post-February 1999 sample we estimate a Threshold Vector Error-Correction Model for US gasoline prices and crude oil prices. We find evidence for a threshold effect after February 1999. The results indicate that firms adjust prices only if the deviations from the long-term equilibrium between the price of crude oil and gasoline is large enough. However, it is not the crude oil price that adjusts but the price of gasoline. Unlike the pre-February 1999 period, short-run changes in both prices tend to reinforce each other driving up the price of crude oil and gasoline.




Food Price Volatility and Its Implications for Food Security and Policy


Book Description

This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.