Hector O. Zapata

Monte Carlo Evidence on Cointegration and Causation

The small sample performance of Granger causality tests under different model dimensions, degree of cointegration, direction of causality, and system stability are presented. Two tests based on maximum likelihood estimation of error-correction models (LR and WALD) are compared to a Wald test based on multivariate least squares estimation of a modified VAR (MWALD). In large samples all test statistics perform well in terms of size and power. For smaller samples, the LR and WALD tests perform better than the MWALD test. Overall, the LR test outperforms the other two in terms of size and power in small samples.

Stochastic Interest Rates and Price Discovery in Selected Commodity Markets

The temporal relationship between Chicago corn and soybean cash prices, nearby futures prices, and interest rates is examined using daily 1980-1989 data. Johansen cointegration tests suggest joint movement of the three series over the data period considered. In addition, analyses of individual crop years, which is consistent with previous work, shows co-movement between cash, futures, and interest rates in years when bivariate cointegration between cash and futures prices was not found. The results provide initial empirical evidence that a potential limitation of previous research in the study of cash- futures simple efficiency has been the exclusion of the interest rate as a common stochastic factor explaining equilibrium in models of cash and futures prices. (This abstract was borrowed from another version of this item.)

Cointegration and causality in international agricultural economics research

A review of literature on applications of Granger causality to problems in international agricultural economics research is summarized. The review relates to cointegration theory, and it identifies the areas where recent econometric developments may be of value. Testing procedures are outlined, and a discussion is provided on questions such as non-stationarity and asymptotic distribution of non-causality tests, the relationship between cointegration and causation, the relative merits of various testing procedures, and concerns about testing bivariate causality in higher dimensional models. Finally, a recent econometric development is discussed and its future use in applied research is discussed.

Functional form of the environmental Kuznets curve

This is a survey paper of the recent literature on the application of semiparametric–econometric advances to testing for functional form of the environmental Kuznets curve (EKC). The EKC postulates that there is an inverted U-shaped relationship between economic growth (typically measured by income) and pollution; that is, as economic growth expands, pollution increases up to a maximum and then starts declining after a threshold level of income. This hypothesized relationship is simple to visualize but has eluded many empirical investigations. A typical application of the EKC uses panel data models, which allows for heterogeneity, serial correlation, heteroskedasticity, data pooling, and smooth coefficients. This vast literature is reviewed in the context of semiparametric model specification tests. Additionally, recent developments in semiparametric econometrics, such as Bayesian methods, generalized time-varying coefficient models, and nonstationary panels are discussed as fruitful areas of future research. The cited literature is fairly complete and should prove useful to applied researchers at large.

Further empirical evidence of wheat and barley market integration in the EU.

ABSTRACT Integration in the EU wheat and barley markets is studied using monthly price series for the 1980-1994 period. The methodology expands previous work on cointegration modeling by testing market integration constraints on the cointegration space; these tests are also supplemented with an evaluation of the short-run dynamics by testing for causality and calculating forecast-error variance decompositions. This adds to previous work which has suggested that cointegra-tion is a necessary but not sufficient condition for market integration. Results are consistent with the self-sufficiency nature of cereal markets in the EU. Prices appear to follow each other in the long-run with more than one stochastic trend. France exerts a leadership in cereal prices as a result of being the main exporter.

Selecting The "Best" Prediction Model: An Application To Agricultural Cooperatives

A credit scoring function incorporating statistical selection criteria was proposed to evaluate the credit worthiness of agricultural cooperative loans in the Fifth Farm Credit District. In-sample (1981-1986) and out-of-sample (1988) prediction performance of the selected models were evaluated using rank transformation discriminant analysis, logit, and probit. Results indicate superior out-of-sample performance for the management oriented approach relative to classification of unacceptable loans, and poor performance of the rank transformation in out-of-sample prediction.

Vertical Integration, Causation and Price Transmission in the Spanish Hog Industry

Vertical integration is becoming one of the most important structural characteristics of agricultural markets. Economic theory suggests three main motivations for tighter vertical coordination linkages (Lawrence et al., 1997): risk reduction, market imperfections, and implementation of non competitive strategies (barriers to entry, price discrimination, etc.). However, no consensus exists about the effects on social welfare. While limiting access of competitors to inputs sources and products outlets is viewed as an adverse consequence, gains in efficiency may be achieved that offset those negative effects.