DP9504 Integration in the English wheat market 1770-1820
|Author(s):||Liam Brunt, Edmund Cannon|
|Publication Date:||June 2013|
|Keyword(s):||domestic trade, economic integration, England and Wales, grain markets, time-series cointegration, transport|
|JEL(s):||N73, Q11, R41|
|Programme Areas:||International Trade and Regional Economics, Economic History|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=9504|
Cointegration analysis has been used widely to quantify market integration through price arbitrage. We show that total price variability can be decomposed into: (i) magnitude of price shocks; (ii) correlation of price shocks; (iii) between-period arbitrage. All three measures depend upon data frequency, but between-period arbitrage is most affected. We measure variation of these components across time and space using English weekly wheat price data, 1770-1820. We show that conclusions about arbitrage are sensitive to the precise form of cointegration model used; different components behave differently; and different factors ? in terms of transport and information ? explain behaviour of different components. Previous analyses should be interpreted with caution.