Analysis of Price Integration in Iran\'s Broiler Market

Seasonal behavior of economic variables, especially agricultural product prices, is one of the important elements of these time series. In recent years, many methods are extended for cointegration analysis with seasonally unadjusted time series. This paper is provided recent advances in the literature on this subject. Therefore, Johansson's maximum likelihood estimation method adjusted to seasonal case is discussed in detail. For this purpose reduced rank regression and switching algorithm strategies are presented for testing seasonal cointegration by the means of vector error correction model. In order to better understanding of the issue, the broiler markets in East Azerbaijan, West Azerbaijan, Ardebil, Zanjan and Tehran provinces are investigated during 1998-2009. Using HEGY test, two unit roots are detected in zero and π frequencies of the broiler price series. Based on the seasonal cointegration analysis the law of price or perfect market integration between five provinces was rejected and there was no price leadership between them, although the partial market integration couldn't be rejected in the intended frequencies. Based on the results of cointegration analysis in broiler market of the five provinces it can be suggested to manage broiler market scientifically, to improve transport networks, to reduce transportation costs and in general transaction costs, to adopt policies in order to reduce arbitrage probability and to organize information in the poultry industry. JEL Classification: Q13, Q18