Dynamic Relationship Between Domestic And International Corn Market Price And The Study Of Pass-Though Effect

Corn is one of the three greatest crops in the world, and is an important guarantee toensure national food and energy security strategy. The broad application of biomass energymakes the increasingly contradiction between the supply and need of the global corn, and alsoleads to the high price of international market corn. With the increasingly deep opening indomestic corn market and the ever-increasing volume of imported corn, the volatile ofinternational corn price is bound to affect domestic corn price through futures market andtrade path. It is a critical target for government to regulate and control the price fluctuationagricultural products represented by corn. Consequently, researching the relationship betweendomestic and international corn market on price volatility by using the combination ofqualitative and quantitative analysis has vital and realistic meaning.This paper uses monthly data from2006to2011. Firstly, the paper analyzes thefluctuation situation and features of domestic and international corn markets, then using theeconometric approaches to deeply study their long-term and short-term relationship. Finally,this paper makes suggestions to adjust domestic corn price on the basis of empirical analysis.This paper consists of five sections.The first chapter is introduction. In this section the background, purpose and meaningconcerning are introduced briefly.The second chapter are analysis the features of price fluctuation in these two cornmarkets, and comparison the price tendencies between these two corn markets andinternational crude oil. It reveals that the price fluctuation of international corn is larger thandomestic corn market, and the international corn price has a close relationship withinternational crude oil price.The third chapter is testing the fluctuation relation between international and domesticcorn prices. The section sets an impact analysis model for domestic corn price in order to testwhether there is long-term and stable relation between international corn price and domesticcorn. On this basis, it use ECM model to study long-term stability relation and short-term fluctuation relation between international and domestic corn prices. Moreover, the Grangercausality relationship between international corn price and domestic corn price is given. Theresult shows that there is a lag effect when fluctuation of international corn price transmits todomestic corn market, while domestic corn price has no significant effect to internationalcorn.The fourth chapter is the study on price pass-through effect between international cornprice and domestic corn price. In this part, the paper analyzes the mutual pass-through effectbetween the two market prices by impulse response function and variance decompositionmethod. Impulse response function shows that, whether long-term or short-term, the effect offuture price on domestic corn is much more important, and the pass-through of internationalfuture price on domestic corn price has a lag effect. Variance decomposition indicates thatfluctuation of domestic corn price has little influence to international corn price, but there is asteadily increasing tendency. And in long run, international corn market’s influence is moreimportant to the fluctuation of domestic corn price.The fifth chapter is the main thesis and suggestions. Firstly, it summarizes the mainthesis, then proposes some suggestions, such as play the functions of the future market，concern the influence of the international factors.