We are grateful to David Harvey and to two anonymous referees for comments on a previous draft.
Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices
Article first published online: 27 APR 2006
Journal of Agricultural Economics
Volume 57, Issue 1, pages 101–116, March 2006
How to Cite
Dawson, P. J. and Sanjuán, A. I. (2006), Structural Breaks, the Export Enhancement Program and the Relationship between Canadian and US Hard Wheat Prices. Journal of Agricultural Economics, 57: 101–116. doi: 10.1111/j.1477-9552.2006.00034.x
- Issue published online: 27 APR 2006
- Article first published online: 27 APR 2006
- (Original submitted July 2005, revision received October 2005, accepted December 2005.)
- export enhancement program;
- North American wheat exports;
- structural breaks
This paper examines the long-term relationship between the export prices of Canadian and US hard wheat and the effects of the US Export Enhancement Program (EEP). Using monthly prices for 1974–2001, we adopt the cointegration procedure of Johansen et al. (2000) which permits structural breaks. Results show that a long-term relationship exists, and there are two breaks that coincide with the EEP. The first break is in late 1985 when the long-term US/Canadian price ratio fell by 5.5%, while the second is in early 1995 when it increased by 9.2%. Weak exogeneity tests imply that Canada is the price leader, and impulse responses show that long-term equilibrium is restored within five months following a shock to either price.