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State-Space Cointegration Modeling for the Analysis of Exogenous Shocks to Prices in Israeli-Palestinian Food Trade

Author

Listed:
  • Rico Ihle

    (Georg-August-University Göttingen)

  • Linde Götz

    (IAMO, Halle)

  • Ofir D. Rubin

    (Ben-Gurion University of the Negev)

Abstract
The Israeli-Palestinian conflict constitutes a prominent example of a long-lasting political conflict which has major consequences for the livelihoods of the people on both sides. The agricultural sectors of the Palestinian and Israeli economies are tightly connected. However, various security measures occasionally implemented in consequence of the political conflict between Israelis and Palestinians strongly inhibit the movement of people and commodities. In order to obtain evidence on the impacts of such abrupt trade impediments on price dynamics, we estimate a vector error correction model in state space form employing the Kalman filter. The time-varying cointegration parameters suggest that the security measures indeed impacted price interdependencies on a short-term scale.

Suggested Citation

  • Rico Ihle & Linde Götz & Ofir D. Rubin, 2011. "State-Space Cointegration Modeling for the Analysis of Exogenous Shocks to Prices in Israeli-Palestinian Food Trade," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 100, Courant Research Centre PEG.
    • Handle: RePEc:got:gotcrc:100
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    File URL: http://www2.vwl.wiso.uni-goettingen.de/courant-papers/CRC-PEG_DP_100.pdf
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    More about this item

    Keywords

    cointegration; error correction; Israel; Palestinian territories; price transmission; state space model; time-varying parameters;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • F15 - International Economics - - Trade - - - Economic Integration

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