Cross -Commodity Price Linkages: A Cointegration Analysis of Food Markets in Java
Idris, Hedi Muhammad
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https://hdl.handle.net/2142/82954
Description
Title
Cross -Commodity Price Linkages: A Cointegration Analysis of Food Markets in Java
Author(s)
Idris, Hedi Muhammad
Issue Date
2002
Doctoral Committee Chair(s)
Nelson, G.C.
Department of Study
Agricultural and Consumer Economics
Discipline
Agricultural and Consumer Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Language
eng
Abstract
Finally, this study has shown that cross-commodity price linkages do exist and it is not due to the influence of the urea price. In cointegrated markets, competitive profit-seeking activities of commodities arbitragers occur. The process of arbitrage keeps prices in different commodity markets in alignment and makes for positive price correlations among different products. For example, a supply-induced increase in the price of rice, (i.e. a rice plant disease), can lead to an increase in demand for corn and cassava and hence rises in their prices. It also induces a market intervention from the governments. In conclusion, the results from this cointegration analysis implies that government can provide a more favorable food price stabilization policy environment that promotes economic efficiency. Meanwhile, the government should also create conducive market structure for private sector initiatives.
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