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Abstract
This study investigates the causal relationship between the prices of rice, crude oil,
wheat, corn and soybean in China, using monthly price data over the period of January 1998 to
December 2013. Employing an autoregressive distributed lag (ARDL) bounds test, we explore
the cointegration relationship among the price variables. We estimate the ARDL long-run price
relationship and the short-run error correction process (ARDL-EC). The results show that rice
price are affected by crude oil, wheat, corn and soybean price as the forcing variables. Both the
long-run and short-run price transmission elasticity estimates suggest the importance of crude oil
price on the formation of rice prices in China. Furthermore, the adjustment speed coefficient is
found to be statistically significant, supporting the notion that there is an error correction
mechanism for maintaining the long-run price relationship facing short-run shocks.