Dynamic integration analysis of wheat markets in China under the background of price support policy
The degree of correlation among regional markets can delegate the degree of market integration, and it is an important indicator to illustrate overall market performance. It has great significance to improve the market efficiency through well understanding the correlation and dynamic volatility of wheat markets in different regions of China under the background of price support policy. Based on regional weekly wheat price data and applying the Bayesian DCC-GARCH Model, this paper empirically analyzed the price fluctuation characteristics and dynamic integration among different regional wheat markets and discussed the behind causes and the influencing factors. Results show that the price volatilities in policy implemented areas were more stable and also more susceptible to the previous period. The correlation among different regional wheat markets still need to be improved in China. The correlation index between Hebei and Shandong and the one between Hebei and Tianjin were relatively higher compared to others, which were 0.265 and 0.257, respectively. Over 1/3 of the correlation indices were above 0.2. The implementation of the price support policy did increase the correlation among different regional markets and improved wheat market integration. In addition, location, geographic proximity, the relative concentration of production areas and government intervenes were also important influencing factors for market integration. Therefore, this paper suggests: to continue the minimum purchasing price policy in the short term with a reasonable target price level, to improve the logistic facilities of wheat markets to increase circulation efficiency, and to continuously improve market mechanism to promote the specialization and scale development of grain production and processing.