Nominal-Time Analysis of Cotton Prices in China Impacts the Use of Granger Causality in Vector Error Correction Model

Eddy Hope Kabasele Bambe, YA-BING LI

Abstract


The paper aims consists of modelling the cotton price index in China to determine the dependency of the previous increase in cotton prices on stocks and imports of cotton in the internal market during the sample period from 1991 to 2014. The paper opted for an empirical study using the time-series Vector Error Correction Model (VECM) framework. The paper provides empirical insights about the innovation of cotton price in domestic market of the China. It suggests that there are bidirectional relationships among the price and the stock in a system. It suggests also that cotton imports serve a significant role in the price index of current trends relative to future stocks. Thus, we concluded that the previous high cotton prices in China were attributed to the previous need to increase cotton stocks but not directly via the import of cotton; however, the latter may have a significant role in the future.

Keywords


Real cotton prices; volatility in cotton prices; VECMs; Granger causality; impulse response

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DOI: https://doi.org/10.24925/turjaf.v6i12.1690-1700.1385

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This work is licensed under Creative Commons Attribution 4.0 International License

ISSN: 2148-127X

Turkish JAF Sci.Tech.

Turkish Journal of Agriculture - Food Science and Technology (TURJAF) is indexed in: