Study On The Transfer Mechanisms And Spillover Effects Of International Cotton Price Fluctuations On Domestic Cotton Price

With the development of integration between international and domestic cotton market, the effect of the international cotton prices’ fluctuations are more significant to our country. In the meantime, cotton support policy in our country changes to the target price which make the cotton market further liberalization, so pay attention to the international cotton price pass-through effect on domestic cotton prices, to explore the impact of international cotton price fluctuations have great practical significance.This paper compares and analyzes the fluctuation characteristics of international and domestic cotton market price sequence; secondly, set the domestic cotton prices and international cotton prices into an analytical framework to study the international cotton price volatility transmission mechanism; and make further quantitative analysis of the international cotton price fluctuations spillover effects of domestic cotton prices. Finally, according to the results of this study, give some corresponding countermeasures in order to stabilize the domestic cotton price and reduce the impact of fluctuations by international cotton prices.The results show that:(1) the domestic cotton market price stability after the implementation of the temporary storage price is better than international market prices, using the Valley- Valley cycle analysis of both volatility can explain the strong correlation between them, there are fluctuations in the co-movement.(2) international cotton and domestic cotton long and short term co-integration relationship are both existed, the price of domestic cotton trade routes pass works there cause two delays, the extent of the whole process lasted for about 13 weakened; by the futures market prices approach, the international futures market price did not achieve the guiding role of the domestic cotton prices, indicating the integration between domestic cotton futures market and the international futures market is not very well. Due to the “big country effect” on the imports of cotton in China, domestic stock market prices impact on the international futures market prices, meanwhile international futures market price has a negative impact on the domestic market price. Due to the “big country effect” on the imports of cotton in China, domestic stock market prices influence the international futures market prices, moreover, international futures market prices have an negative impact on the domestic market price. While facing the external shock, domestic futures prices of cotton affect the domestic prices of cotton most among all the variables. The domestic cotton market bears the main role of smooth the price fluctuations of cotton. Both the international and domestic cotton futures market would stabilize the price fluctuations relying on the market forces itself. Both the international and domestic cotton market prices are affected by their preceding fluctuations. The preceding international and domestic cotton prices have Volatility Spillover Effect on the current cotton price. For short term, the Volatility Spillover Effect of international cotton prices on the fluctuations of domestic price fluctuations, which is stronger and more lasting than the Volatility Spillover Effect of domestic cotton prices on the fluctuations of international price fluctuations.According to the research conclusions, this paper puts forward three countermeasures. First, the implementation of target prices subsidies of cotton. Second, the standardization and improvement of the cotton futures trading market. Third, the establishment of a sound early warning mechanism for the cotton price fluctuations.