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\hypersetup{pdftitle={Price Integration in Brazilian and International Cotton Markets},pdfauthor={Ana Caroline Dias Caixeta, Cleyzer Adrian Cunha, Alcido Elenor Wander},pdfsubject={Tropentag 2016: Abstract},pdfkeywords={Cotton Prices Integration, Threshold Vector Error Correction, TVEC},pdfpagemode=None,colorlinks=true}
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\parbox[b]{13.4cm}{\centering \large{\textbf{Tropentag, September 18-21, 2016, Vienna, Austria}}\\[1ex] \Large{``Solidarity in a competing world ---\\fair use of resources''\\[2ex]}}
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\Large{\textbf{Price Integration in Brazilian and International Cotton Markets\footnote{\textbf{Contact Address:} Alcido Elenor Wander, Brazilian Agricultural Research Corporation (EMBRAPA), National Rice and Beans Research Center (CNPAF), Rodovia GO-462, km 12, 75375-000~Santo Antonio de Goias, Brazil, \mbox{e-mail}: \email{alcido.wander@embrapa.br}}\\[0.8ex]}}
\normalsize{\textsc{Ana Caroline Dias Caixeta$^{1}$, Cleyzer Adrian Cunha$^{2}$, Alcido Elenor Wander$^{3}$}}
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\begin{itemize*}
\item[]{\small{\textit{$^{1}$Federal University of Goias (UFG), Postgraduate Programme in Agribusiness, }}}
\item[]{\small{\textit{$^{2}$Federal University of Goias (UFG), School of Economics, Brazil}}}
\item[]{\small{\textit{$^{3}$Brazilian Agricultural Research Corporation (EMBRAPA), National Rice and Beans Research Center (CNPAF), Brazil}}}
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\index[author]{Dias Caixeta, Ana Caroline}
\index[author]{Cunha, Cleyzer Adrian}
\index[author]{Wander, Alcido Elenor}
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\textbf{Abstract}
\begin{abstract}
\normalsize{
This study aimed to analyse the integration of prices in the Brazilian and international cotton market considering transaction costs. For this purpose, we analysed time series of CEPEA and NYBOT price indices, representing the national and international cotton market, respectively, from January 2000 to December 2014. Therefore, we used the methodology the Vector Error Correction Model with Threshold (TVEC) with two regimes. TVEC models enable measurement of transaction cost in the process of market integration, even without availability of this information. The existence of transaction costs inhibits price transmission between the considered markets. In this case, only price shocks above a certain level are transmitted, which negatively affects markets' integration. The value found for the threshold parameter $\delta$, in module, was 0.177371. This means that shocks up of at least \mbox{17.73\,\%} are transmitted between national and international cotton markets. Moreover, we also analysed the results in two adjustment schemes. The first scheme, which represented \mbox{5.6\,\%} of the sample, corresponds to the long"=term deviations not led to any adjustment. These price changes respond only to short"=term variations. In the second scheme, which corresponded to \mbox{60.1\,\%} of the sample, are deviations above the estimated threshold. Therefore, this variation depends on both short and long term. The findings showed a significant presence of transaction costs in both schemes, which negatively affect the price transmission process, hindering the integration of prices in the cotton market. In literature shows several factors that lead to transaction. But, the main factor is associated with the physical distance between locations. However, it is important to remind that issues related to logistics and infrastructure can contribute to existence of transaction costs between physically separated markets.}

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\noindent \textbf{Keywords:} Cotton Prices Integration, Threshold Vector Error Correction, TVEC
\index[key]{Cotton Prices Integration}
\index[key]{Threshold Vector Error Correction}
\index[key]{TVEC}
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