Browsing by Author "Valdes, Rodrigo"

R. Valdes, S. von Cramon-Taubadel, and J. Diaz. 2011. Market integration for Chilean wheat prices using vector error correction models (VECM), a cointegration analysis. Cien. Inv. Agr. 38(1): 5-14. Historically Chile has been a wheat net importer country. This situation, added to the small size of its economy, causes that the domestic price of this cereal is highly influenced by import prices of substitute wheat. This research analyzed the integration level of the Chilean wheat market with respect to the USA and Argentinean markets using a vector error correction model (VECM), the impact of the band prices (D-BAND) and the change of the band mechanism introduced in 2004 (D-MECH) by the inclusion of two binary variables in the VECM. The results showed strong market integration among Argentina, Chile and USA, with USA leading the market. Additionally, the price of the Chilean wheat was influenced by the USA and Argentina prices. The binary variables, included in the models, showed that this system had been useful to protect the domestic market by reducing the fluctuations of the wheat prices (D-BAND), and the new mechanism performs as a protection over the international fluctuations (D-MECH). Both coefficients presented non-significative values, probably due to the difference among the input cost and the domestic price support mechanism, the sub-valuated commodities markets, increment on cereal price levels, inflationary scenarios and low number of observations.

Studies investigating the effect of trade liberalization policies on transaction costs in agricultural markets are scarce. The objective of our paper is to determine whether Brazil became more integrated with reduced transaction costs after the introduction of MERCOSUR with respect to its main agricultural trade partners, Argentina (a MERCOSUR member) and the United States (a non-MERCOSUR member). Using a threshold vector error correction model (TVECM), we estimate the transaction cost, price transmission elasticity and half-life adjustments for the most traded agricultural products between Brazil/Argentina and Brazil/United States from January 1980 to December 2012. Our findings suggest a strong MERCOSUR effect, with lower transaction costs and higher price transmission elasticity when compared to a non-agreement scenario. Moreover, the variations of both parameters are highly heterogeneous across products, depending mainly on their degree of differentiation. From a policy perspective, elements such as the sources of comparative and competitive advantages together with investment policies, specific market regulations and agricultural subsidies, among others, are mainly what influence the extent of transaction cost and market integration. Our results show that Brazil has made progress but still has considerable room for improvement in reducing barriers to agricultural products and, as a consequence, to achieving the full benefits of the MERCOSUR agreement. (C) 2015 Elsevier Ltd. All rights reserved.

This article explores the drivers of regional stock market integration with a focus on the agribusiness sector across relevant regional trade blocs around the world. We implement panel cointegration models to analyze the stock indices of agribusiness firms in the Southern Common Market (MERCOSUR), European Union (EU), Asia-Pacific Economic Cooperation (APEC), and North American Free Trade Agreement (NAFTA). Based on the literature on market integration and stock return pricing, we identify nine possible determinants of stock market integration, which we separate into three categories: individual market performance, macroeconomic conditions, and agricultural trade. In our analysis, we account for agriculture-specific factors to control for possible structural shifts in financial markets regimes by including the two main commodity price bubbles during last 20 years. Our results show that most of the variables included in our categories have been important factors in promoting regional stock market integration. Moreover, integration among regional stock markets was strengthened by the implementation of trade agreements. This effect is stronger in trade blocs with fewer members, such as NAFTA and MERCOSUR, compared with larger and more heterogeneous blocs, such as the EU and APEC.