Agricultural Policies

Paper

Market Integration, Price Transmission and Import Surges

FAO Import Surge Project Working Paper No. , May (2005)

The paper provides the basis for discussing the relation between empirical price transmission studies and the likelihood of import surges. It is argued that no a priori theoretical predictions can be made on the impact of less than complete price transmission on the behaviour of imports. The nature of price transmission and the manner in which markets are integrated, however, can affect the likelihood of observing import surges, especially where markets are characterized by unsynchronized cycles and/or by prohibitively high transaction or adjustments costs, that may lead to nonlinear price responses. It is shown that Threshold Error Correction Models can be used to test for the presence of such nonlinearities, thus providing insights on the incidence of import surges.

You can also read linked documents for this article.