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Are Fruit and Vegetable Prices Non-linear Stationary? Evidence from Smooth Transition Autoregressive Models

Author

Listed:
  • Jhih-Hong Zeng

    (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan)

  • Chun-ping Chang

    (Shih Chien University at Kaohsiung, Kaohsiung, Taiwan)

  • Chien-chiang Lee

    (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan)

Abstract

Over the last decade, there has been a growing interest in investigating agricultural commodity prices. We apply two more powerful smooth transition autoregressive models of the non-linear unit-root test - namely, the ESTAR model of Kapetanios et al. [Journal of Econometrics (2003)] and the LSTAR model of Leybourne, et a . [Journal of Time Series Analysis (1998)] - with a view to investigating non-linear stationarity for the retail prices of 8 major kinds of fruit and 18 major kinds of vegetable in Taiwan. The empirical evidence clearly finds that the Kapetanios et al. model provides solid, substantive evidence in favor of a non-linear mean-reverting adjustment for the individual price of 4 kinds of fruit and 5 kinds of vegetable. However, when we employ the Leybourne et al. model, we find that any such similar evidence of non-linear stationarity is considerably weaker. Finally, compared with the traditional linear unit root tests, it is important to note here that, all in all, the non-linear unit root tests do indeed provide much more evidence of the stationarity, albeit to varying degrees. This paper offers some policy implications.

Suggested Citation

  • Jhih-Hong Zeng & Chun-ping Chang & Chien-chiang Lee, 2011. "Are Fruit and Vegetable Prices Non-linear Stationary? Evidence from Smooth Transition Autoregressive Models," Economics Bulletin, AccessEcon, vol. 31(1), pages 189-207.
    • Handle: RePEc:ebl:ecbull:eb-10-00137
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    References listed on IDEAS

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    1. Fredoun Z. Ahmadi-Esfahani, 2006. "Testing the law of one price in the Chinese wholesale food markets," Agribusiness, John Wiley & Sons, Ltd., vol. 22(4), pages 569-589.
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    Cited by:

    1. Shrestha, Rudra Bahadur & Huang, Wen-Chi & Ghimire, Raju, 2014. "Market Price Cointegration Of Tomato: Effects To Nepalese Farmers," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(2), pages 1-10, April.
    2. Melis Tartici, 2015. "A Reinvestigation of the Hysteresis Hypothesis in the OECD Countries," Econometrics Letters, Bilimsel Mektuplar Organizasyonu (Scientific letters), vol. 2(1), pages 22-40.

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    More about this item

    Keywords

    Smooth transition autoregressive model; Non-linear stationary; Fruit price; Vegetable price; Taiwan;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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