COINTEGRATION BETWEEN U.S. WHEAT MARKETS |
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Authors: | David A. Bessler Stephen W. Fuller |
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Affiliation: | Department of Agricultural Economics, Texas A&M University, College Station, Texas 77843–2124 |
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Abstract: | ABSTRACT. Average monthly price data from twelve hinterland markets and the Houston port price for wheat are studied in a cointegration framework using the Engle-Granger "two-step" procedure and Johansen's maximum likelihood procedure. Out-of-sample forecasts from an error correction model are compared to those from a vector autoregression fit to levels and a univariate autoregression fit to first differences. This comparison suggests that modeling these (cointegrated) data as a levels vector autoregression, rather than as an error-correction process, results in significantly higher error bias, but lower error variance, at long horizons. |
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