The Integration of Swedish and global grain markets
Increased trade and eased policy restrictions have brought markets closer together. Prices at different locations are much likely to affect each other to a certain extent. Since the adaption of Common Agricultural Policy in 1995 the Swedish wheat market has been exposed to the world market and Swedi...
| Autor principal: | |
|---|---|
| Formato: | First cycle, G2E |
| Lenguaje: | sueco Inglés |
| Publicado: |
2014
|
| Materias: | |
| Acceso en línea: | https://stud.epsilon.slu.se/6983/ |
| Sumario: | Increased trade and eased policy restrictions have brought markets closer together. Prices at different locations are much likely to affect each other to a certain extent. Since the adaption of Common Agricultural Policy in 1995 the Swedish wheat market has been exposed to the world market and Swedish farmers are facing new challenges. A broader knowledge about market integration and price transmission will facilitate Swedish farmers, banks and politicians in making rational decisions. Therefore the aim of this research is to explain how global wheat prices are transmitted on Swedish wheat prices. In reaching the final result thus explaining the cointegration between separate time series, a Vector Error Correction Model is applied. Monthly time series data from Swedish Board of Agriculture and global price data from the World Bank is used.
Initially the price series have been tested for non-stationarity and showed significant results, thus trended time series, followed by a cointegration test. The outcome denoted a long-run relationship between price on the Swedish and global wheat market. Afterwards the vector error-correction model proved that Swedish wheat prices are responding to market disequilibrium in the short-run but not vice versa for the world market. Consequently prices of Swedish wheat are reflecting the volatility on the global wheat market both in the long- and short-runt. However the markets are not perfectly integrated due to various trade barriers such as tariff and quotas. To research can be extended to get more sophisticated representations with threshold- and asymmetric cointegration models. |
|---|