Threshold Cointegration and Price Transmission in Commodity Marketsof India

Author:

Mishra A.1ORCID,Kumar P. R.1ORCID

Affiliation:

1. National Institute of Food Technology Entrepreneurship and Management

Abstract

The purpose of this research work is to examine the relationships and price dynamics between agricultural commodities in India, i.e.maize, wheat, barley and soybean. Our approach is to study the long-term relationship using the method of modelling the price transmission for both linear and threshold autoregressive (AR) models and vector error correction (VEC) models. Results revealed that all the price series are well integrated, and threshold error correction models prove that all price series move to restore the long-run relationship, whereas commodity stock prices respond slightly faster than market prices in the short-run. Conclusions from this study show that understanding the price transmission flow and its impact on pricing might help in making better trading strategies. It also regulates the public policy implications of the active participation of farmers in national-level commodity exchanges.

Publisher

Financial University under the Government of the Russian Federation

Subject

Management of Technology and Innovation,Economics, Econometrics and Finance (miscellaneous),Finance,Business, Management and Accounting (miscellaneous)

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