PRICE DYNAMICS IN THE U.S. FIBER MARKETS:ITS IMPLICATIONS FOR COTTON INDUSTRY

The paper examines the price dynamics in the U.S. fiber market using error correction version of Granger causality test. Monthly prices are used to examine short-run and long-run price relationships simultaneously. Before specifying causal equations, time series properties of the prices are tested and are found to be first difference stationary and cointegrated. The causality results suggest weak lead-lag relationship between cotton and polyester prices in either direction. However, strongest relation is instantaneous feedback (within a month) between cotton and polyester prices. It may be interpreted from these results that any shock to the equilibrium relationships is mostly restored within a month. In addition, highly significant error correction terms in cotton and polyester equations also suggest the absence of distinct price leader which means both prices respond to restore equilibrium relationships.


Issue Date:
2003
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/35071
Total Pages:
2003
Series Statement:
Selected Paper




 Record created 2017-04-01, last modified 2017-04-26

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