Market Adjustment Strategy for Qualitative Commodities Basket: Application of Weakly Exogenous Test for Iran’s Rice Market

Authors

• S. S. Hosseini
• M. Kavoosi Kalashami
• Sh. Kavosi

Abstract

Rice commodity basket involves different qualitative varieties in a way that establishing proper policies and programs for controlling and adjusting price in market is very difficult. According to qualitative difference of rice varieties, using different qualitative basket and price leader variety in market could be considered as two original solutions for adjusting rice market. For acquiring proper strategy in rice market adjustment on the basis of price relationship, present study investigated price relationship among seven main rice varieties’ price system include Sadri Momtaz, Sadri Daraje Yek, Sadri Mamoli, Binam, Tarom, Khazar and Neda during 1999 though 2009 using monthly time series data. Results of stationary ADF and KPSS tests showed that all of seven time series were I(1). Using co-integration test, long run relationship among mentioned time series were investigated. Bivariate co-integration test results revealed that Sadri Momtaz time series was independent from other system variables and should be omitted from the system. Finally, using adjustment matrix elements and weakly exogenous test, it was revealed that Sadri Daraje Yek, Khazar and Neda playing the role of price leadership in rice market. Existing weakly exogenous characteristic for Sadri Daraje Yek, Khazar and Neda varieties showed that these varieties were motive elements in process of determining price of other rice varieties. So, concentrating and basing adjustment market programs on price leadership varieties could result immediate, efficient and effective control of prices in rice market
 

Keywords

• Price leadership
• Weakly exogenous test
• Co-integration
• Rice

20.1001.1.20086407.1391.4.14.2.4

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