Cointegration and price linkages in the MERCOSUR beef cattle markets.

ABSTRACT.This research provides empirical evidence of the degree of integration of Mercosur region beef cattle markets with the international market. Prices for six spatially distinct cattle markets located in the four countries were analyzed using a fractional cointegration approach. The analysis included the computation of fractional integration parameters and the error term of the cointegration equations. The null hypothesis of ?separate markets? could not be rejected in any of the cases. This conclusion is absolute for Argentina; there is strong evidence of separate markets with Uruguay, which was chosen as a proxy of the international market. For Brazil and Paraguay, empirical results may suggest a weak degree of market integration but not enough to reject the null hypothesis. Despite the common price and industry trends in thedifferent markets, their responses to specific price shocks were dissimilar and, most importantly, the reversion of the prices to equilibrium was always slo