Market Integration Analysis and Time-series Econometrics: Conceptual Insights from Markov-switching Models
Marktintegrationsanalyse und Zeitreihenökonometrie: Begriffseinblicke aus den Markov-Switching Modellen
von Isaac Abunyuwah
Datum der mündl. Prüfung:2008-01-31
Erschienen:2008-05-14
Betreuer:Prof. Dr. Stephan von Cramon-Taubadel
Gutachter:
Gutachter:Prof. Dr. Stefan Sperlich
Dateien
Name:abunyuwah.pdf
Size:1.69Mb
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Description:Dissertation
Zusammenfassung
Englisch
The concept of market integration (MI) and inter-markets price dynamics in international trade, commodity markets and industrial organisation domains have directly been linked to market efficiency, competitiveness and various policy strategies. Consequently, measurement and testing issues in MI analysis have received considerable attention over the years. The broadness of the concept in particular has however resulted in introduction and development of diverging measurement techniques. Two major lines of MI assessment methods have emerged within agricultural markets studies; namely, price transmission econometrics- formulated within time series framework and the Parity Bound Model (PBM). The later is an arbitrage-based measure of inter-markets outcomes evaluated along spatial equilibrium conditions. Major advancements have been achieved in these methodological lines in their respective settings over the last decade. Thus, notwithstanding the fact that insights from the above two lines of market integration analysis raise important market policy, measurement and theoretical questions under specific inter-market conditions, they have not been combined effectively so far. Formulating a robust technique that comprehensively confronts market integration analysis (MIA) without seriously ignoring fundamental theoretical concepts and their implications has remained a challenge. While the time series characteristics of markets inter-relationships carry important policy and methodological implications, they impose analytical complexities when other crucial elements of market integration concept such as transactions cost, arbitrage and spatial equilibrium conditions are to be directly reflected. In view of the above challenge, the study operationalised a working definition for MI as both process and outcome of inter-market relations manifested in an existence of one price ( in relation to cost of trade), price transmission and or physical flow of goods between the markets. In effect, various weaknesses and strengths of existing tools were theoretically explained in section three of the study. Notably, how the concept of tradability and time dynamics in arbitrage responses can lead to misleading conclusions under the PBM approach has been systematically explained and demonstrated by the study. In section three, the regime switching implications imposed by spatial equilibrium and arbitrage conditions were linked to the concept of multiple equilibria in time space. To accommodate both inter-markets processes and outcomes, we have proposed Markov switching models as an alternative regime switching tool to both the PBM and current time series price transmission econometrics tools. Specifically, the proposed Markov switching model (MS-VEM) combines the basic threshold autoregressive structure from the PTE and arbitrage-based equilibrium conditions implied by the PBM. Based on the theoretical foundation built in section three, all arbitrage conditions are decomposed into their respective time path characteristics within the concept of rent irreversibility. Following the modelling technique of arranged autoregression (usually applied in threshold models), we have shown that the complications imposed by transactions cost can be eliminated by sample splitting techniques. We have consequently, demonstrated in the thesis through a synthesised exercise that the flexibility of Markovian formulations allows them to handle both adjustments dynamics that underpin the PTE and the equilibrium conditions that drive the PBM.
Keywords: market integration; Parity Bound Model; arbitrage and spatial equilibrium conditions; Markov-switching model
Weitere Sprachen
Die Konzepte der Marktintegration (MI) und
Zwischenmarktpreisdynamik im internatio-nalen Handel, Warenmärkten
und Industrieorganisationsgebieten stehen in direkter Ver-bindung
zu Marktleistungsfähigkeit, Wettbewerbsfähigkeit und verschiedenen
politischen Strategien. Demzufolge haben die Mess- und Prüfprobleme
in der MI Analyse im Laufe der Jahre beträchtliche Aufmerksamkeit
erhalten. Bedingt durch die Breite des Konzeptes ist es zur
Einführung und die Entwicklung von divergierenden Mess-Techniken
gekom-men.
In dieser Studie werden die Komplexitäten der Marktintegration und
der Preisübertra-gungsdynamik innerhalb von
Zwischenmarktgleichgewicht-Bedingungen bewertet. Dabei sind Quellen
und Implikationen von spezifischen Defiziten der gegenwärtigen
nichtlinea-ren Marktintegrationsmodelle ausgehoben worden. Die
Studie hat das Markov-Switching Gleichgewicht-Modell als eine
vereinigende Ansicht für die umfassende Marktintegrati-onsanalyse
vorgeschlagen und bewiesen. Die Flexibilität des Markovschen
Rahmens wird innerhalb der Schwelle (TAR) Formulierungen verwendet,
um sowohl Zwischen-markt-Gleichgewichtprozesse als auch Ergebnisse
abzuleiten. In Anlehnung an die Mo-dellierungstechnik der
eingeordneten Autoregression haben wir gezeigt, dass die durch
Transaktionskosten auferlegten Komplikationen mit
stichprobenaufspaltenden Techniken beseitigt werden können. Daher
haben wir durch eine zusammengefügte Übung in der These
demonstriert, dass die Flexibilität der Markovsche Formulierungen
ihnen erlaubt, sowohl Anpassungstriebkräfte, die die
Preisübertragungsökonometrie unterstützen als auch
Gleichgewicht-Bedingungen, die die Parität-gebundenes Modell (PBM)
treiben, zu behandeln.
Schlagwörter: Marktintegration; Arbitrage; Raumgleichgewicht; Markov-Switching