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The transmission of world maize price to South African maize market: a threshold cointegration approach
Author(s) -
Abidoye Babatunde O.,
Labuschagne Marlene
Publication year - 2014
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12102
Subject(s) - cointegration , economics , econometrics , order (exchange) , bayesian probability , world market , transmission (telecommunications) , market price , agricultural economics , microeconomics , international trade , statistics , mathematics , computer science , telecommunications , finance
This article seeks to provide an explanation for the relationship between domestic maize price in South Africa and world maize prices in order to evaluate comovement and transmission of world prices to domestic prices in sub‐Sahara African countries. This is done by comparing nested and nonnested models that capture different forms of nonlinearity in the price spread. Adopting a Bayesian approach that allows for comparison of models using Bayes factor, we found that the relationship between South African price and world price for maize indicates the presence of nonlinearity in price transmission with three regimes that is triggered by the price spread in previous period.