PurposeEggs bear an essential role in Iranian diet, primarily for their protein content. The egg production strictly depends on the price of inputs, that is corn used for poultry feeding. The upsurge ...in corn prices in recent years gave rise to both consumers’ and producers’ dissatisfaction, increasing production cost and the egg price in the final market. The purpose of this paper is to investigate the price-transmission dynamics between corn and retail egg prices in Iran.Design/methodology/approachIndividual commodity price series generally contain stochastic trends and they are non-stationary. Standard unit root and cointegration tests will be conducted in order to determine whether price series are stationary and whether they are cointegrated, respectively. The existence of cointegration between the two-price series depends on the nature of autoregressive process. If there is an asymmetric convergence between two variables, then Engle and Granger’s (1987) test can have a misspecification error and the result cannot indicate nature of variables. Threshold or asymmetric convergence test should be used, which can detect the asymmetric behavior of variables and threshold effects on series.FindingsResults showed that, in the long run, owing to price transmission, any price shocks on corn price will be transmitted to the egg price.Practical implicationsPolicy makers should implement input and output price policies to support producer and consumer in the retail market to increase consumer and producer welfare, and they should also control intermediaries in this market.Originality/valueThis research dealing with price transmission has been concerned only with applying time-series modeling techniques to price data. The main focus of this approach has been to characterize vertical price relationships by the extent, speed and nature of the adjustments through the supply chain to market shocks generated at different levels in the marketing process. Thus, it complements the marketing margin models, which are mainly concerned with testing for market imperfections and calculating the price transmission. Besides these points, particular importance has been given in this research to the question of symmetry of price adjustments.
We have investigated the behaviour of the Shanghai Stock Exchange Composite (SSEC) index for the period from 1990:12 to 2007:06 using an unconstrained two-regime threshold autoregressive (TAR) model ...with a unit root developed by Caner and Hansen. The method allows us to simultaneously consider nonstationarity and nonlinearity in time series that has regime switching. Our finding indicates that the Shanghai stock market exhibits nonlinear behaviour with two regimes and has unit roots in both regimes. The important implications of the threshold effect in stock markets are also discussed.
This study examines the Purchasing Power Parity (PPP) hypothesis in case of India for her five major trading partners over the period of 1991M
1
–2009M
2
. The study used the DF-GLS unit root test ...and threshold autoregressive (TAR) model as well as momentum-TAR (M-TAR) models for empirical analysis. However, we relied on TAR and MTAR models based cointegration tests to draw conclusions because of their superiority to traditional cointegration techniques as these models have limit cycles, amplitude dependent frequencies, and jump phenomena. These models are capable of producing asymmetric limit cycles and are suitable for time series data. Our empirical exercise reveals that PPP hypothesis does not exist for all major trading partners in case of India. This reveals that intermediate goods face high barriers to trade in this sampled countries. This supports the argument that Indian government has not been able to strike out the proper balance between flexibility and stability between real bilateral exchange rates and thus unable to maintaining confidence in the domestic currency that has been evident from the recent fall of rupee in relation to the US dollar.
This study investigates the weak form efficient market hypothesis (EMH) for five generalized stock indices in the Johannesburg Stock Exchange (JSE) using weekly data collected from 31st January 2000 ...to 16th December 2014. In particular, we test for weak form market efficiency using a battery of linear and nonlinear unit root testing procedures comprising of the classical augmented Dickey-Fuller (ADF) tests, the two-regime threshold autoregressive (TAR) unit root tests described in Enders and Granger (1998) as well as the three-regime unit root tests described in Bec, Salem, and Carrasco (2004). Based on our empirical analysis, we are able to demonstrate that whilst the linear unit root tests advocate for unit roots within the time series, the nonlinear unit root tests suggest that most stock indices are threshold stationary processes. These results bridge two opposing contentions obtained from previous studies by concluding that under a linear framework the JSE stock indices offer support in favour of weak form market efficiency whereas when nonlinearity is accounted for, a majority of the indices violate the weak form EMH.
Whether purchasing power parity (PPP) holds for the German mark (euro)–Turkish lira real exchange rate has significant implications on Turkey's prospects for joining the European Union (EU). As such, ...it is important to accurately test the empirical validity of PPP between the two currencies. To do so, we apply the methodology developed by Caner and Hansen Caner, M., & Hansen, B. (2001). Threshold autoregression with a unit root.
Econometrica,
69(6), 1555–1596, which allows us to simultaneously consider non-stationarity and non-linearity. Our findings indicate that PPP holds for the lira–mark exchange rate in one threshold regime but not in another. They also provide stronger support for PPP in the most recent years.
One way that has been used for identifying and estimating threshold autoregressive (TAR) models for nonlinear time series follows the Markov chain Monte Carlo (MCMC) approach via the Gibbs sampler. ...This route has major computational difficulties, specifically, in getting convergence to the parameter distributions. In this article, a new procedure for identifying a TAR model and for estimating its parameters is developed by following the reversible jump MCMC procedure. It is found that the proposed procedure conveys a Markov chain with convergence properties.
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