Asymmetric Adjustment of Rice Export Prices: The Case of Thailand and Vietnam

Abstract This paper attempts to model the price relationship between two leading exporters of rice, being Thailand and Vietnam. The motivation of such research is to reveal whether prices are integrated and determine whether any causal relationships exist among prices for rice. Given the perception that exists regarding the imperfectly competitive nature of the rice market, especially in the high quality rice segment, the paper aims to test for the presence of cointegration in the presence of asymmetric adjustment. The results conclude that the nature of asymmetry is captured by the M-TAR model which suggests that the path of adjustment to the long run equilibrium relation is relatively faster when the price differential is decreasing than opposed the case when it is increasing