The Integration of the Indian Wheat Sector into the Global Market

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Abstract/Contents

Abstract: World food prices have risen rapidly in recent months. The trend has brought up concerns about how markets in developing nations respond to international conditions. In this paper, I try to determine whether the price of wheat in India converges to the world level. Using monthly prices from the United States of America, Canada, Australia, Argentina, and India over a period of thirteen years, I look for evidence of cointegration among the series. Cointegrated series follow a common stochastic process, and thus can be said to move together. I first test for cointegration without restrictions to identify the number of cointegrating vectors and common trends, and then impose restrictions to see how quickly markets adjust to disequilibria. I find evidence that the world wheat trading centers are integrated, with Australia being the most dominant. The Indian wheat price does not converge with the other four. I next use the Granger Representation Theorem to model the adjustment of the markets to shocks. I find that the Indian market adjusts more slowly to a new equilibrium, but the total magnitude of adjustment is greater. Possible explanations include poor infrastructure, regional segmentation within India, and high levels of government intervention.

Type of resource	text
Date created	May 2008

Author	Shenoy, Ashish
Primary advisor	Hansen, Peter
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	India
Subject	wheat
Subject	food price
Subject	cointegration
Genre	Thesis

Location	https://purl.stanford.edu/zm633sf5415

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Preferred Citation: Shenoy, Ashish. (2008). The Integration of the Indian Wheat Sector into the Global Market. Stanford Digital Repository. Available at: https://purl.stanford.edu/zm633sf5415

Stanford University, Department of Economics, Honors Theses

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