Common trends, common cycles, and price relationships in the international fiber market

Mohamadou L. Fadiga, Sukant K. Misra

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

A multivariate unobserved component model was applied to identify common movements among cotton, wool, rayon, and polyester world prices. Two common stochastic trends and cycles govern the stochastic behaviors of price fluctuations in the world fiber market. These unobserved components have important implications as they can help in the design of more efficient commodity programs to smooth terms of trade shocks, especially in developing countries. The study found the effect of inventory adjustments on world cotton price is diminishing, which indicates that speculative behaviors in the world fiber market are less prevalent than previously thought.

Original languageEnglish
Pages (from-to)154-168
Number of pages15
JournalJournal of Agricultural and Resource Economics
Volume32
Issue number1
StatePublished - Apr 2007

Keywords

  • Common factors
  • Fiber prices
  • Kalman filter
  • State-space
  • Unobserved components

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