Asymmetric Price Transmission In Soybean Market Through Threshold Cointegtaion Model

Soybean industry is one of the most fully open industries in China.The price volatility always attracts people's attention.Study its price transmission can help us know better about the price relationship among different market levels and offer important information support for government control.For one thing,our soybean demand is intensively depended on import,for another thing,our government introduced many price support policy to protect farmer's benefit in recent years.Under this background,what will the price transmission of the soybean market be like?Does international soybean price have important impact on domestic soya oil?What the price transmission between soybean purchase price and wholesale price?What causes these different price transmission?These questions above are what we want to answer.The structure of this article is as below.We first introduce the development of price transmission.We introduce the estimation method and the availability of threshold cointegration.Then we discuss price transmission in two aspects.One is the price transmission between international soybean price and domestic soya oil price.Another is the price transmission between purchase price and wholesale price.We first do the data stationary tests,and then conduct the cointegraion test to confirm whether these prices are in a long run equilibrium.Then we use three threshold cointegration models to test whether the transmission process is linear or nonlinear.Based on the threshold cointegration model,we estimate a short dynamic error correction model to find how one level of the price can affect the price from another level.At last,we try to find some causes to explain the asymmetric price transmission.We get these conclusions:There is a threshold cointegration relationship between international soybean price and domestic soya oil price.Soya oil price react more quickly to the decrease than to the increase in soybean price when the discrepancy from the long run equilibrium exceed the threshold.On the contrary,there exists negative threshold cointegration asymmetric price transmission between domestic soybean purchase price and wholesale price.Wholesale price leads the purchase price.Wholesale price reacts more quickly to the increase than to the decrease in the purchase price when the discrepancy from the long run equilibrium exceed the threshold.Market power,government intervention,asymmetric information may be the reason for different asymmetric price transmission.