Price and Volatility Transmission in International Wheat Futures Markets

Jian Yang

Jin Zhang


David J. Leatham

This study examines futures price and volatility transmissions among three major wheat production and exporting regions, the United States (US), Canada and the European Union (EU) over the recent six-year study period of 1996 - 2002. The price transmission pattern shows that Canadian prices are much more influenced by the US prices than the US prices are influenced by Canadian prices. The EU is highly self-dependent and may exert some influence on the US prices in the long run but not vice versa. The volatility transmission pattern, however, shows that volatility is transmitted from Canada and the EU to the US but not vice versa. The volatility is also transmitted from the EU to Canada but not vice versa. Overall, there is no distinctive leadership role in international wheat markets, with all three markets exhibiting features of price leadership to some extent.

Key Words: Price and volatility transmission; Generalized forecast error variance decomposition; Generalized impulse response analysis; Multivariate GARCH.
JEL Classification Numbers: C32, L13.