integration of global rice market after the … · 1.1 characteristics of the global rice market:...

2016-2017

INTEGRATION OF GLOBAL RICE MARKET AFTER

THE AGRICULTURAL TRADE LIBERALIZATION

Choe, Kyoungin

Promotor: Prof. Jeroen Buysse

Co-promoter: Prof. Doo Bong Han

Thesis submitted in partial fulfilment of the requirements

for the joint academic degree of International Master of Science in Rural Development from Ghent University (Belgium), Agrocampus Ouest (France), Humboldt University of Berlin (Germany), Slovak

University of Agriculture in Nitra (Slovakia) and University of Pisa (Italy) in collaboration with Wageningen University (The Netherlands),

This thesis was elaborated and defended at Ghent University within the

framework of the European Erasmus Mundus Programme “Erasmus Mundus

International Master of Science in Rural Development " (Course N° 2010-0114 –

R 04-018/001)

Certification

This is an unpublished M.Sc. thesis and is not prepared for further distribution.

The author and the promoter give the permission to use this thesis for

consultation and to copy parts of it for personal use. Every other use is subject to

the copyright laws, more specifically the source must be extensively specified

when using results from this thesis.

The Promoter(s) The Author

(name(s) and signature(s)) (name and signature)

Thesis online access release

I hereby authorize the IMRD secretariat to make this thesis available on line on

the IMRD website

The Author

(name and signature)

I

Integration of Global Rice Market after the

Agricultural Trade Liberalization

KYOUNGIN CHOE

Abstract

Japan and Korea partially opened its rice market through the Uruguay Round Agreement implemented in 1995, and

widened it through tariffication in 1999 and 2014, respectively. To this day, however, they are considered protective

markets in the global trade. This is because these countries have implemented several protective measures, such as price

and income support programs as well as a diversion program in rice farming. Therefore, an attempt was made in this

study to determine if the two aforementioned markets have actually been separated from the global rice market since after

the implementation of the UR agreement. In this study, cointegration and causality tests were mainly performed to

examine the existence and direction of market integration among rice markets. Especially, the Korean and Japanese rice

markets for the periods before and after the implementation of the UR agreement in 1995 were focused on. Three main

study results were obtained. First, there is a long-run relationship among global rice prices (prices of Thailand, Arkansas

and California in the United States). Second, the Korean and Japanese wholesale rice prices were found to have no long-

run relationship with other global rice prices in both periods. Third, it may be expected that the Korean rice market will

be temporarily isolated from global market based on the Japanese rice market case. In the long-term perspective, however,

the border protection measures will be continuously reduced. Therefore, it may be inevitable for the Korean rice market

to compete with the global rice markets.

Keywords: Uruguay Round Agreement, Rice market, Cointegration test, Causality test, Korea, Japan

II

CONTENTS

List of Tables ................................................................................................................................ III

List of Figures ............................................................................................................................... IV

1. Introduction .................................................................................................................................. 1

1.1 Characteristics of the global rice market: Thin and volatile ................................................. 1

1.2 Global rice trade: Indica and Japonica rice........................................................................... 3

1.3 Rice market opening in Japan and Korea ............................................................................. 4

1.4 Objectives and structure of the study.................................................................................... 6

2. Korean and Japanese Rice Economies ....................................................................................... 7

2.1 Structural changes in the rice market.................................................................................... 7

2.2 Changes in the rice policies in Korea and Japan ................................................................ 13

3. Literature Review ....................................................................................................................... 17

4. Data and Methodology ............................................................................................................... 21

4.1 Data .................................................................................................................................... 21

4.2 Methodology ...................................................................................................................... 23

5. Empirical Results ....................................................................................................................... 26

5.1 Cointegration tests ............................................................................................................. 27

5.2 Causality tests .................................................................................................................... 31

5.3 Impulse response and variance decomposition analyses ................................................... 33

6. Conclusion ................................................................................................................................... 43

References ...................................................................................................................................... 46

III

List of Tables

Table 1. The share of rice market of leading exporting countries ........................................................ 3

Table 2. Japan’s minimum access tenders (1995-2014) ....................................................................... 5

Table 3. Korea’s minimum access tenders (1995-2014) ...................................................................... 6

Table 4. Significance of rice farming in Korea .................................................................................... 8

Table 5. Direct payment program: Implemented in rice sector in Korea ........................................... 14

Table 6. Unit root tests ....................................................................................................................... 26

Table 7. Multivariate cointegration tests (October 1987-December 1994) ........................................ 29

Table 8. Multivariate cointegration tests (January 1995-September 2016)........................................ 29

Table 9. Bivariate cointegration tests (October 1987-December 1994) ............................................. 30

Table 10. Bivariate cointegration tests (January 1995-September 2016) ........................................... 30

Table 11. Causality tests (October 1987-December 1994) ................................................................. 32

Table 12. Causality tests (January 1995-September 2016) ................................................................ 32

Table 13. Variance decomposition of Arkansas rice price .................................................................. 40

Table 14. Variance decomposition of Thai rice price ......................................................................... 41

Table 15. Variance decomposition of Californian rice price .............................................................. 41

Table 16. Variance decomposition of Korean rice price .................................................................... 41

Table 17. Variance decomposition of Japanese rice price .................................................................. 42

IV

List of Figures

Figure 1. The share of trade volume: Rice, wheat, corn and soybeans ................................................ 2

Figure 2. Global trade in rice and share of production ......................................................................... 2

Figure 3. Per-capita rice consumption in Korea ................................................................................... 9

Figure 4. Harvested area and production of rice in Korea ................................................................... 9

Figure 5. Per-capita rice consumption in Japan ................................................................................. 11

Figure 6. Production and harvested area of rice in Japan ................................................................... 11

Figure 7. Changes in ending stocks and stock-to-use ratio of rice in Japan ...................................... 12

Figure 8. Monthly rice price in five markets ...................................................................................... 22

Figure 9. Impulse responses for the first period ................................................................................. 34

Figure 10. Impulse responses for the second period .......................................................................... 36

1

1. Introduction

1.1 Characteristics of the global rice market: Thin and volatile

Rice is a major staple food for almost half of the world’s population, and is one of the primary sources

of calories. Since recently, around 480 million metric tons of rice have been produced per year

(Muthayya et al., 2014). The international rice market is generally regarded as thin and volatile

because the global trade volume of rice is relatively small. Compared to 41.6% for soybeans, 23.5%

for wheat, and 14% for corn, only 8.5% of the global rice production has been traded in the current

year (2016) (Figure 1). This is due to the geographic concentration of rice production and

consumption as well as the government intervention with both the rice exporters and importers. Rice

is not only a main source of income for rural economies but is also a politically sensitive good in

those countries. Therefore, the governments have intervened in the domestic and global markets to

stabilize their respective rice economies. In particular, the major rice-exporting countries introduced

export restrictions after the food crisis in 2008, and those actions caused a 40% reduction in the export

volume of rice (United States International Trade Commission, 2015). Meanwhile, some rice-

importing countries, such as Korea, Japan, and Taiwan, set minimum market access (MMA) and

imposed a high level of tariff on imported rice to secure their rice economies.

Nevertheless, the global rice trade has gradually expanded over the last 50 years. It started to increase

in the late 1980s as a result of the trade liberalization in many countries and the implementation of

the General Agreement on Tariffs and Trade (GATT)・Uruguay Round (UR) agricultural agreement

in 1994. Specifically, the volume of international rice trade has been extended about sixfold. It rose

from 6.4 million tons in 1960 to 40.9 million tons in 2016. Moreover, trade as a share of the total

production has more than doubled from 4.2 to 8.5% over such periods (Figure 2). The international

rice trade involves a small number of exporting countries and a relatively large number of importing

countries (Dorosh & Wailes, 2010). Furthermore, the market concentration of the leading rice-

2

exporting countries increased over the last decades. In the 1970s, the top five rice exporters accounted

for 69% of the world market. This share gradually increased and reached 77% in the 2000s. More

recently, the top five rice-exporting countries accounted for about 83% of the global rice exports in

2015 (Table 1). On the other hand, the rice imports are geographically scattered. The imports by five

major countries (China, Nigeria, Philippines, EU, and Saudi Arabia) accounted for only 30% of the

global trade in 2015 (USDA, 2016b).

Figure 1. The share of trade volume: Rice, wheat, corn and soybeans (1965-2016)

Figure 2. Global trade in rice and share of production (1960-2016)

0

5

10

15

20

25

30

35

40

45

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(%)

(Year)

Soybeans Wheat Corn Rice

02468101214161820

05

101520253035404550

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(%)(Million tons)

(Year)

Share (%) Export volume (million tons)

Source: USDA

Source: Calculated from USDA data

3

Table 1. The share of rice market of leading exporting countries (Unit: %)

1970s 1980s 1990s 2000s 2015

United States 21 Thailand 33 Thailand 28 Thailand 29 India 26

Thailand 18 United States 19 Vietnam 13 Vietnam 15 Thailand 23

China 19 Pakistan 9 United States 13 India 13 Vietnam 14

Pakistan 6 China 8 India 10 United States 11 Pakistan 11

Myanmar 5 Italy 5 China 7 Pakistan 9 United States 9

Sub-total 69 Sub-total 74 Sub-total 71 Sub-total 77 Sub-total 83

Source: Calculated using the data from FAOSTAT and USDA PS&D online

1.2 Global rice trade: Indica and Japonica rice

Two major types of rice are traded globally: Indica and Japonica rice. Indica rice is long-grain with a

low level of moisture, and accounts for more than 75% of the global rice trade. Japonica rice, on the

other hand, is medium- and short-grain, with a sticky texture; it accounts for about 10% of the global

rice trade (Marton, 2014). Indica rice is produced mainly in Southeast Asia, including Thailand and

Vietnam; in the United States, outside California; and in Latin America. Japonica rice, on the other

hand, is produced and consumed mainly in Northeast Asia, including Korea, Japan, Northern China,

and Taiwan; and in California in the United States. Northeast Asia is the largest market for Japonica

rice, importing almost half of the global Japonica shipments. Japan and Korea are the largest and

third-largest buyers of U.S. Japonica rice, respectively (USDA, 2016b). However, the highest degree

of protection in the global rice trade is aimed at Japonica rice due to the protection provided mostly

by Japan, Korea, and Taiwan. Durand-Morat and Wailes (2011) showed that the trade-weighted ad-

valorem tariff was 111% in 2008 for the medium-grain Japonica rice. This is extremely high compared

to that of the long-grain variant (21%). The UR agreement implemented in 1995, however, has played

a crucial role in the Japonica rice market. The imports of such rice product into the importing countries

will continue to be restricted to some extent. Nonetheless, it is obvious that the partial rice market

opening in Korea and Japan will most likely influence the Japonica rice market.

4

1.3 Rice market opening in Japan and Korea

Japan and Korea had refused to import rice and exclusively controlled their rice trade over several

decades. They started to open their respective rice markets, however, as a result of the implementation

of the GATT・UR agricultural agreement in 1995. A special exception measure of tariffication was

applied to the rice trade in Japan and Korea. Instead, they had to import a mandatory rice quota every

year, and the volumes have gradually increased. The grace period that was given for removing the

tariff barriers was six years (1995-2000) for Japan and ten years (1995-2004) for Korea. In Japan’s

case, the minimum access (MA) rice import started from 4% of the base-period consumption (1986-

88) in 1995, and increased by 0.8% per year until it reached 8% in 2000 (Table 2). At the same time,

Korea started to import the MA quota in 1995 as 1% of the base-period consumption (1986-88). Then

it was gradually expanded by 0.2% per year until it reached 2% in 2000 and 4% in 2004 (Table 3).

Meanwhile, Japan shifted to a tariff rate quota (TRQ) in 1999. It set the out-of-quota rate at 341 yen

per kg, which is equivalent to 778% in ad-valorem tax. Consequently, the mandatory import volume

decreased to 682,000 metric tons in 2000. As the out-of-quota rate is extremely high, only around 100

tons of rice was imported per year (Kako, 2013). Moreover, the simultaneous buy and sell (SBS)

import formula was introduced as a part of MA rice, and was mainly used for foods. Meanwhile,

579,000 metric tons of MA rice were imported in 2005, and the volume was gradually increased up

to 666,000 metric tons in 2014 (Table 3). MA rice was mainly used for processing and as a food aid

and feed. Thus, imported rice have less effected on Japan’s domestic rice market. On the other hand,

Korea waived rice tariffication for another 10 years, from 2005 to 2014. Instead, under the World

Trade Organization (WTO) regulations, it had to increase the volume of its rice imports. The MA

volume increased from 4.4% of the domestic consumption in 2005 to 8% of the domestic

consumption in 2014. Moreover, a portion of the imported rice had to be sold directly to the

consumers for table use. This was begun from 10% of the total imported volume in 2005, and then

5

increased to 30% in 2014. Therefore, during the second special treatment period in Korea, the

oversupply of rice became a serious problem. The Korean government imported 409,000 metric tons

of rice in 2014, which is equivalent to 9.7% of the rice consumption in the same year. In 2014, the

Korean government decided to introduce tariffication and imposed an extremely high level of tariff

(513%) on the over-the-quota imports.

Japan and Korea opened its rice market by allowing several agricultural trade flows, and widened it

through tariffication. To this day, however, they are considered protective markets in the global trade.

This is largely because such countries have protected their respective markets using several protective

measures. For example, they have implemented a series of price/income support programs, and have

purchased domestic rice. Furthermore, the domestic consumers have supported the domestic rice

price, and this has made the producer price much higher than the other global Japonica rice prices

(Wailes, 2005). Consequently, such actions may distort the rice market, and may isolate the two

aforementioned countries from the global rice market. Through this study, therefore, an attempt was

made to determine if such two markets are well integrated to the other international rice markets after

the agricultural trade liberalization, and to compare the level of integration to that before the

liberalization.

Table 2. Japan’s minimum access tenders (1995-2014)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

MA

(1,000 MT) 398 444 489 512 533 573 580 629 571 585

SBS

(1,000 MT) 11 22 55 120 120 120 100 50 100 94

Total 409 466 544 632 653 693 680 680 671 679

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

MA

(1,000 MT) 579 578 517 581 520 640 581 580 515 666

SBS

(1,000 MT) 100 100 100 100 91 37 100 100 60 12

Total 679 678 617 681 611 677 681 680 575 678

Source: Ministry of Agriculture, Forestry and Fisheries (MAFF)

6

Table 3. Korea’s minimum access tenders (1995-2014)

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

MA

(1,000 MT) 51 64 77 90 103 103 128 154 180 205

Portion of

Consumption

(%)

1 1.3 1.5 1.8 2 2 2.5 3 3.5 4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

MA

(1,000 MT) 226 246 266 287 307 327 348 368 388 409

Table Use (%) 10 14 18 22 26 30 30 30 30 30

Source: Ministry of Agriculture, Food and Rural Affairs (MAFRA)

1.4 Objectives and structure of the study

This study had three objectives: (1) to identify the structural changes and major policies implemented

in the rice sector, and how such actions have affected the rice markets in Korea and Japan, respectively;

(2) to investigate the integration of the Korean, Japanese, and international rice markets by

determining if there was integration among the selected markets before and after the implementation

of the UR agreement, and if so, determining the direction of such integration, through cointegration

and causality tests, and by examining the short-run linkages among the markets through impulse

response and variance decomposition analyses; and (3) to find some lessons for the Korean rice

market from the Japanese rice market case. Japan shifted to TRQ in 1999, ahead of Korea, and has

implemented a set of protective measures similar to those implemented by Korea. Thus, by examining

the Japanese rice market, some useful insights for the Korean rice economy may be derived.

The remainder of this paper is organized as follows. Chapter 2 presents an overview of the rice

economies in Korea and Japan, and Chapter 3 reviews the related literature. In Chapter 4, the data

and methodology that were used in this study are discussed. In Chapter 5 and 6, the study’s empirical

results and conclusion are discussed, respectively.

7

2. Korean and Japanese Rice Economies

2.1 Structural changes in the rice market

2.1.1. Korea

Table 4 shows the significance of rice farming in Korea from 1970 to 2015. Specifically, the number

of rice farm households was around 2 million in 1970, which was 81% of the total farm households

then. This portion increased to 86.3% in 1990 but started to decrease thereafter. The value dropped to

66% in 2010, and then to 58% in 2015. Moreover, the portion of the income from rice farming was

55.6% in 1970, but it has gradually decreased since then. The portion of the rice income was about

40% in 2000, and even decreased to 19% in 2015. Lastly, the portion of the paddy field area has also

generally decreased since 1990. It was 52.3% in 1970 and increased to 59% in 1990. It dropped to

52% in 2010, however, and further decreased to 47.6% in 2015. This is because since after the

implementation of the UR agreement, the scale of the rice industry has decreased, and the farmers

have kept changing their crops from rice to industrial crops, for instance (Cho & Park, 2014).

The rapid economic growth and urbanization have caused a dramatic shift in the Asian diet from the

staples to other products, such as livestock, dairy, and fruits (Pingali, 2007). Consequently, the rice

consumption has gradually decreased, and this is especially true in Korea. In 1978, the per-capita rice

consumption was 182.7 kg, which is the highest value over five decades (Figure 3). It started to

decrease, however, thereafter. The decrease rate was 1.12% per year in the 1980s, and increased to

2.39% in the 1990s. It even increased to 2.6% in 2000 (Song et al., 2014). Finally, the per-capita rice

consumption was 84.8 kg in 2015, which was only 46.4% of the value in 1978.

Figure 4 shows the areas where rice is harvested, and the production of rice. The rice-planted areas

increased to 1.26 million ha in 1988 due to the rice production encouragement policy. It started to

decrease, however, in the late 1980s. This is because the good harvest continued but the rice

consumption kept decreasing. Consequently, the rice stock increased dramatically, which virtually

8

reduced the rice price and the rice-harvested areas. As a result, the total rice-harvested area decreased

to 1 million ha in 1996. Then the cultivated area increased until 2001 but has decreased since then

until the recent year. The total rice-harvested area was 0.78 million ha in 2015, which was only 63%

of that in 1990. Meanwhile, rice production has shown a decreasing trend since 1990. This is because

the rice-harvested area decrease rate is faster than that of the yield increase rate. The rice production

decreased by 1.6% per year after 1990, and by 1.2% per year after 1995.

Table 4. Significance of rice farming in Korea (1970-2015)

1970 1980 1990 1995 2000 2005 2010 2015

Total Farm

Households

(thousands, A)

2,483 2,155 1,767 1,501 1,384 1,273 1,177 1,089

Rice Farm

Households

(thousands, B)

2,011 1,837 1,525 1,205 1,078 938 777 635

B/A (%) 81 85.2 86.3 80.3 77.9 73.7 66 58.3

Income from

Farming

(1000Won, C)

248 2,342 9,078 16,012 19,514 26,496 27,221 33,654

Income from Rice

Farming

(1000won, D)

138 1,140 4,380 5,450 7,758 7,264 5,368 6,373

D/C (%) 55.6 48.7 48.2 34.0 39.8 27.4 19.7 18.9

Total Arable Area

(1000ha, E) 2,298 2,196 2,109 1,985 1,889 1,824 1,715 1,679

Paddy Field

(1000ha, F) 1,203 1,233 1,244 1,056 1,072 980 892 799

F/E (%) 52.3 56.1 59 53.2 56.7 53.7 52 47.6

Source: Ministry of Agriculture, Food and Rural Affairs (MAFRA)

9

Figure 3. Per-capita rice consumption in Korea (1960-2016)

Figure 4. Harvested area and production of rice in Korea (1960-2016)

0

20

40

60

80

100

120

140

160

180

200

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(kg/capita)

(Year)

0

200

400

600

800

1000

1200

1400

0

1000

2000

3000

4000

5000

6000

7000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(1,000 ha)(1,000 ton)

(Year)

Production Harvested area

Source: USDA

Source: USDA

10

2.1.2. Japan

The rice consumption in Japan has gradually decreased since the 1960s, mainly due to the changes in

the food consumption patterns. The per-capita rice consumption was about 118 kg in 1971, but it

dropped to 86.5 kg in 1980, and then to 77.5 kg in 1990 (Figure 5). As a result, the Japanese

government was heavily faced with an oversupply of rice (Fukuda et al., 2003). Thus, several rice

diversion programs have been implemented since 1970 (Kako et al., 1997). Consequently, the total

rice-harvested area decreased from 2.4 million ha in 1980 to 1.8 million ha in 2000 and 1.6 million

ha in 2015. The level of production was highest in 1967 at 13.1 million tons, but it declined to 7.7

million tons in 2015 (Figure 6). Nevertheless, Japan still faces oversupply issues as its per-capita rice

consumption dropped to less than 70 kg in 2016, and as the rice imports have gradually increased

over the decades. Figure 7 shows the changes in the rice stocks and the stock-to-use ratio. The ending

stocks started to be an issue in Japan in the 1970s and generally became a bigger issue until 1990.

They then showed a decreasing trend in the 1990-1995 period. As the Japanese government agreed

to import rice under the UR agreement in 1994, however, the ratio started to increase again. The

ending stock was around 1.7 million tons in 2015, which accounted for 38.8% of the Japanese rice

trade. Moreover, the stock-to-use ratio is much higher than the adequate level of 16% recommended

by FAO.

11

Figure 5. Per-capita rice consumption in Japan (1960-2016)

Figure 6. Production and harvested area of rice in Japan (1960-2016)

0

20

40

60

80

100

120

140

160

180

200

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(kg/capita)

(Year)

0

500

1000

1500

2000

2500

3000

3500

0

2000

4000

6000

8000

10000

12000

14000

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(1,000 ha)(1,000 ton)

(Year)

Production Harvested area

Source: USDA

Source: USDA

12

Figure 7. Changes in ending stocks and stock-to-use ratio of rice in Japan

0

5

10

15

20

25

30

35

40

45

0

500

1000

1500

2000

2500

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

(%)(1,000 ton)

(Year)

Ending stock (1,000 ton) Stocks-to-use ratio (%)

Source: USDA

13

2.2 Changes in the rice policies in Korea and Japan

2.2.1 Korea

From the late 1940s to 2005, the Korean government purchased a vast amount of rice outputs, which

virtually influenced the domestic rice prices. Moreover, the government even paid more for rice in

the 1970s due to the self-sufficiency issues. The subsidies for rice farming were provided by banning

the imports over several decades, and this made the Korean rice prices remain much higher compared

to the global rice prices. The support mechanisms continued until the early 1990s, but they were

restricted in 1995 by the UR agreement. Under the WTO rules, Korea had to change its policy from

the provision of price subsidies to the provision of direct income support. Consequently, the Korean

government introduced a series of direct payment programs to cope with the agricultural liberalization

(Table 5). Such policies mainly aimed to enhance the income of the rice farm households and to

increase the scale of rice farms (Choi et al., 2016a). The government started by introducing a direct

payment program for the aged farmers’ retirement in 1997. After the rice re-negotiation in 2004, the

Direct Payment Program for Rice Income Compensation was introduced. The direct payment contains

both the area and deficiency payment methods while the area payment is given to the owner of the

rice paddy, and the amount is determined by the size of the paddy field. The deficiency payment is

available for the farmers who are currently producing rice on a registered farmland. The deficiency

payment amount is determined based on the difference between the target price and each year’s

postharvest price. If the postharvest price is lower than the target price, the farmers can receive 85%

of the difference after deducting the fixed payment. In addition, in the mid-2000s, the Korean

government encouraged the farmers to cultivate less rice because of the oversupply issue (Choi &

Smith, 2012).

The rice purchasing program was ended in 2005, and the Korean government has introduced the

Public Food Grain Stockholding Program (PFSP). This program was designed mainly for stabilizing

14

the rice price and for the establishment of food security in Korea. Under this program, the government

purchases domestic rice at the average market price during the harvest season, and then sells it at the

domestic market price during the non-harvest season (Choi et al., 2016b). The Korean government

purchased 360,000 metric tons of rice in 2015-2016. Moreover, it bought 240,000 metric tons of rice

to support the price of rice (Choi & Myers, 2016). As a result, the rice stocks rose to 34% of the

consumption level in 2015 (Choi et al., 2016b).

Table 5. Direct payment program: Implemented in rice sector in Korea

Types of direct payment Introducing-ending period Main objective

Early retirement of aged farmers 1997-current Structural adjustment

Paddy-Field environment

conservation 2001-2004

Environmentally friendly

farming

Rice farmers’ income stabilization 2002-2004 Income stabilization

Set-aside of paddy-field 2003-2005 Structural adjustment

Rice income stabilization payment 2005-current Income compensation

Source: Im (2013)

15

2.2.2. Japan

The rice policies in Japan was based on the Food Control Law until 1995, but it was abolished and

transformed to the Staple Food Law. Japanese government has mainly focused on three types of

policies to cope with the market price and over-supply issues. First, Japanese government has

purchased some portions of domestic production and sell it for food and non-food uses. Second, they

implemented various income stabilization programs and the subsidies were given to farmers who

participated in acreage control program. The Rice Farming Income Stabilization Program began in

1998. Under this program, there is no direct support to the rice market prices. Instead, rice farmers

are compensated when the market price in a harvesting year drops below a standard price, which is

calculated by the moving average market price of previous years (Fukuda et al., 2003). Moreover, a

new farm income support program has implemented for all rice farmers in 2010. In the end of the

year 2013, however, Japan announced the plan for reforming the agricultural policy. They set a plan

to abolish the direct payment for rice. It is mostly because the cost of support program was a big

burden for Japanese government. Specifically, the budget for direct payment of rice was 307 billion

yen in 2010, and 155 billion yen in 2012. Moreover, due to those programs, over supply issues were

ineffectively handled. Therefore, variable payment was abolished starting from the harvested crops

in 2014, and fixed payment was decreased to half of value in the same year. Moreover, fixed payment

will be abolished in 2018 (OECD Publishing, 2014). Instead, Japanese government has tried to

support more for rice which used as feed and powder to cope with the oversupply issue. Lastly,

Japanese government introduced a rice diversion program in 1971 to deal with the oversupply of rice.

Through this program, the government encouraged farmers to use rice paddy fields for producing

other crops such as wheat and soybeans. Before the diversion program, rice planted area was around

3.3 million ha in 1968, but it has gradually decreased. Specifically, it declined to 2.1 million ha in

1995, and further decreased to 1.6 million ha in 2010 (Maclean et al., 2013). Moreover, those acreage

16

control programs have contributed to increase the market price by diminishing the production of rice

(Takahashi, 2012).

17

3. Literature Review

In recent decades, several authors have examined the rice market integration, and the studies can be

categorized into three streams. The first comprises studies that test market integration within domestic

rice markets. These studies were mostly conducted by developing countries, and found long-run

relationships among domestic markets. For example, Silvapulle and Jayasuriya (1994) used multiple

cointegration approach to explore the market integration in the Philippines. They found that domestic

rice prices have a long run relationship. Ismet et al. (1998) applied multivariate cointegration

methodology to capture the price linkages in Indonesian rice markets. They used the period of 1982-

1993 to evaluate the factors affecting the integration, and found that government intervention has

positively affected the market integration. Dawson and Dey (2002) investigated the long-run

integration in Bangladesh after the trade liberalization. They applied dynamic VAR framework and

found that rice markets are perfectly integrated to each other. Nga and Lantican (2009) analyzed the

spatial integration of domestic rice price in Vietnam and the export prices. The results showed that

only 9 out of 34 rice markets are integrated, but prices are well transmitted among the rice markets.

Moreover, they confirmed the cointegration between two export prices. Hossain and Verbeke (2010)

examined whether the domestic rice markets in Bangladesh are well integrated to each other after

liberalization of the rice market. They used Johansen co-integration test, and found that there is a

long-run relationship among rice markets, but the speed of price transmission has been weakened.

Acharya et al. (2012) examined the integration among Indian wholesale rice markets, showing that

there was long run linkage even among geographically dispersed markets.

The second stream tests the market integration between international and domestic rice markets,

generally concluding that they are well integrated. For example, Alam et al. (2012) analyzed the

relationship between Bangladesh and international rice price. Using an error correction framework,

they concluded that there is a unidirectional long-run relationship, from the world to domestic prices.

18

John (2013) conducted causality and impulse response analysis to examine the price transmission

between Thailand’s domestic and export rice markets. He found that there is a bi-directional price

transmission between markets. Moreover, Thailand’s paddy pledging program distorted price in the

short run, but export price transmitted to domestic prices afterwards. Ahmad and Gjølberg (2015)

analyzed the rice market integration within Pakistan's markets and between Pakistan and international

markets. They found that Pakistan's domestic rice markets generally were well integrated, and those

markets were also integrated with international markets, Thailand and Vietnam. They chose the data

period which includes the major policies took place. They found that the abolishment of price support

policy positively affected on domestic integration, but export related policies negatively affected on

the integration with international rice markets.

The third stream is to test the market integration between international rice markets. Those studies

generally tried to identify which country acts as a price leader in selected rice markets. Yang and Cho

(1997) examined dynamic relationship between Japonica and Indica rice by conducting causality and

cointegration test. They concluded that law of one price does not hold for selected rice markets.

Yavapolkul et al. (2006) examined the price linkages between developed and developing countries

after the UR agreement. They found that partial market integration exists among developed and

developing countries, and developed countries acted as a price leader in those markets. Chulaphan et

al. (2013) investigated cointegration and causal relationships among major rice exporting countries:

United States, Thailand and Vietnam. They found that those markets are well integrated, and there

are bi-directional causal relationships in high and low-quality rice markets. John (2014) examined

price transmission among five rice exporting countries, Thailand, Vietnam, Pakistan, United States

and Argentina. He conducted Granger and Toda-Yamamoto causality tests, and found that price

relations are strong among Asian rice markets, and those markets act as price leaders for exporting

markets. Sirikanchanarak et al. (2016) examined the co-movement between rice export prices of

19

Thailand and Vietnam using Causality test and impulse response functions. The authors found that

there are price transmission between two markets, and the Vietnam act as a price leader.

In the last 20 years, several relevant studies were conducted in Korea, with focus on rice market

opening. Most of the previous studies analyzed the impact of MMA and derived some policy

implications for securing the Korean rice economy (Park, 1997; Han et al., 1999; Kim & Kim, 2004;

Kim & Lee, 2005; Im et al., 2005). A number of studies, on the other hand, examined the effects of

choosing either tarification or special treatment for rice (Lee & Kim, 2000; Lee, 2001; Shin & Ito,

2009). Other studies examined the Japanese and Taiwanese rice markets and derived some

implications for the Korean markets (Kim, 1995; Park, 1996; Kim & Jung, 2004; Lee & Cho, 2010).

This is because the Japanese and Taiwanese rice markets are similar to that of Korea, and they

returned to tariffication from MA ahead of Korea. Specifically, Japan and Taiwan returned to the

tariffication system in 1999 and 2003, respectively. As Korea opened its rice market only in 2015, the

Japanese and Taiwanese markets could provide a lesson for the Korean rice market. For example, Lee

and Cho (2010) examined the relationships between the domestic and imported rice in Japan. They

conducted a cointegration test under the error correction framework, and showed that there is a long-

run relationship between the Japanese and imported rice markets. Moreover, based on the Japanese

case, the researchers expect that the rice imported from the United States and China will affect the

Korean rice market in the future.

This study followed but extended the previous studies in the following aspects. First, there have been

numerous studies that handled the rice market integration, but few studies have included Northeast

Asia, such as Japan, Taiwan, and Korea. These countries have been leading rice-importing countries

especially in the Japonica rice market. Moreover, the policies within such markets have severely

affected the global rice market. Therefore, conducting a study on Northeast Asia may be helpful in

understanding not only the countries situated in such region but also the global rice market. Second,

20

some Korean studies examined the Japanese and Taiwanese rice markets after the tariffication.

Specifically, those studies focused on how these two countries have handled the imported rice, and

which domestic policies have been implemented. Overall, the authors tried to identify the effects of

the rice market opening after the tariffication in Japan and Taiwan, and tried to derive important

lessons for the Korean rice economy. Most of the previous relevant studies, however, did this through

qualitative analysis. As this study includes both qualitative and quantitative analyses, it may provide

more concrete information on the related countries.

21

4. Data and Methodology

4.1 Data

Monthly data are used in this study which covers the data periods from October 1987 to September

2016. The periods are selected based on the data availability and divided into two parts, before and

after the trade liberalization. Specifically, the first period is from October 1987 to December 1994

and the second period is from January 1995 to September 2016. This study focuses on five rice

markets: Korea, Japan, Thailand, Arkansas and California in the United States. Korean wholesale rice

price1 were taken from aT (Korea Agro-Fisheries & Food Trade Corporation) for the prices from

January 1996 to September 2016. Moreover, rice producer price indices from October 1987 to

September 2016 were collected from Statistics Korea. Using those indices, we derived the Korean

rice price for the whole period, which is considered in this study. Japanese wholesale rice price2 were

provided by Prof. Shoichi Ito which originally collected from Nikkei Shimbun, a daily newspaper in

Japan. The data analysis for Japanese rice price is conducted only after the UR agreement because of

the limitation of data. For the international rice markets, Arkansas and California in the United States

and Thailand are included. The data for spot prices of Arkansas and California were obtained from

Bloomberg which originally collected from market news published by USDA. No. 2 Medium grain

for Californian rice and long grain for Arkansas rice are used. Thai 100% broken FOB price (grade

B) were obtained from Rice Yearbook and Outlook published by USDA. The reason of choosing

those regions is that Arkansas is the largest rice producing state in the United States. It produces about

58% of total U.S. Indica (long grain) rice production (USDA, 2016a). California is the second leading

rice producing state in the United States, and produces about 62.3% of the U.S. Japonica (medium

and short grain) rice production (USDA, 2016a). Moreover, Japan and Korea are the major importers

1 Medium quality of Korean wholesale price are used for analysis and price includes indirect cost such as management

and labor costs. 2 Akitakomachi rice price are used because it is the most representative rice in Japan.

22

for Californian rice. Specifically, Korea have imported more than 1 million tons of Californian rice

since 1995 (Choi et al., 2016), and Japan imports around half of California’s export volume (Childs

et al., 2005) Lastly, Thailand is the second largest rice exporters, and the export volume accounts for

about 23% of global trade (USDA, 2016a).

All the time series are expressed in U.S. dollar per metric ton and transformed into natural log form

to remove trends. Figure 8 presents logged form of prices which considered in this study. The

fluctuations of international rice prices seem to have closely followed each other. Especially, the

prices of Arkansas and Thailand closely correlated each other. It is reasonable because they are

competing each other in the same market as Indica rice. However, Japanese and Korean rice prices

are different from global rice markets in several aspects. The prices of Japan and Korea never falling

below the global price, and have shown much higher level than global prices in whole period.

Moreover, even when international prices soared in 2008, Japanese and Korean rice prices seem stable.

Nevertheless, Compared to before the UR agreement, the gap between Korean and international rice

prices narrowed after the UR agreement. More recently, it can be clearly seen that the differences

virtually went down.

Figure 8. Monthly rice price in five markets (October 1987-September 2016)

4

4.5

5

5.5

6

6.5

7

7.5

8

8.5

9

1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

(Log o

f U

S d

oll

ars

per

ton)

(Year)

Japan Korea California Arkansas Thailand

Source: USDA

23

4.2 Methodology

First, unit root tests are performed to find out whether the variables are integrated of the same order.

For this purpose, we apply the Augmented Dickey-Fuller (1979) test (ADF) and the Phillips and

Perron (1988) test (PP) under the null hypothesis that there is a unit root. The PP tests differ from the

ADF tests regarding how they deal with serial correlation and heteroscedasticity of errors.

Specifically, the ADF tests use a parametric auto-regression to approximate the ARMA framework of

the errors in the regression. However, the PP tests ignore the serial correlation in the test regression

(Zivot and Wang, 2007). In this study, we consider both ADF and PP tests for the unit roots. For the

ADF test, we estimate the following regression:

Δ ln 𝑃𝑡 = 𝑐 + 𝜌 ln 𝑃𝑡−1 + ∑ Γ𝑗Δ ln 𝑃𝑡−𝑗 + 𝛽𝑇 + 𝜖𝑡𝑝𝑗=1 (1)

Where ln 𝑃𝑡 denotes the logged price series and ∆ is a first-difference operator. We may rewrite ρ =

γ − 1, where γ is the AR(1) coefficient of ln 𝑃𝑡. Γ𝑗 is the coefficients for the ρ lagged difference terms,

ln 𝑃𝑡−𝑗, 𝑇 is the time trend, and 𝜖𝑡 represents a white noise error term. By using equation (1), we can

test the null hypothesis that there is a unit root (ρ = 0 , which implies γ = 1 ). For the PP test,

following equation is used:

ln 𝑃𝑡 = 𝛼 + 𝛽t + 𝛾 ln 𝑃𝑡 + 𝜐𝑡 (2)

where ln 𝑃𝑡 is the logged price series. The null hypothesis is that ln 𝑃𝑡 contains a unit root (𝛾 = 1).

Next, Johansen (1988) and the Johansen and Juselius (1990) cointegration tests are used to determine

the long-run relationship among rice markets. The cointegration framework can be represented by a

vector auto regressive (VAR) model, expressed as the following equation:

Δln 𝑃𝑡 = Π ln 𝑃𝑡−1 + ∑ Γ𝑗Δ ln 𝑃𝑡−𝑗 + 𝜔𝑡𝑝−1𝑗=1 (3)

where ln 𝑃𝑡 is k × 1 vector of logged prices, and 𝜔𝑡 is a random error term that follows a Gaussian

white noise process. In addition, Π = ΓΑ′, Α is k × r matrix and each column indicates cointegrating

vector. Using the rank of matrix Π(r) , we show the long-run relationships among the variables.

24

Specifically, when Π has a full rank, namely r = k (where k is the number of endogenous variables),

any linear combination of ln 𝑃𝑡 variables will be stationary. On the other hand, If Π has zero rank,

r = 0 , then any linear combination of ln 𝑃𝑡 variables will be nonstationary, which means that the

variables are not cointegrated. The Johansen method is applied to test whether we can reject the

restriction introduced from the reduced rank of Π. The eigenvalues are used to construct two test

statistics for testing the existence of the number of unique cointegrating vectors between variables,

known as the trace test and the maximum eigenvalue test. The trace and maximum eigenvalue tests

can be expressed as the following equation:

𝜆𝑡𝑟𝑎𝑐𝑒 = −𝑇 ∑ ln(1 − �̂�𝑖)𝑘𝑖=𝑟+1 (4)

𝜆𝑚𝑎𝑥 = −𝑇 ln(1 − �̂�𝑟+1) (5)

where �̂�𝑖 is the estimated values of the ordered eigenvalues obtained from the estimated matrix, and

𝑇 is the number of observations. The trace statistic tests have the null hypothesis that there are at most

r cointegrating vectors. The maximum eigenvalue tests have the null hypothesis that the cointegrating

vector is r against the alternative of r + 1.

Following the cointegration test, a Granger causality test (1969) was conducted to examine the

existence and direction of price transmission across markets. The test was based on the bivariate VAR

model using the following equations:

ln 𝐴𝑡 = ∑ α𝑖 ln 𝐴𝑡−𝑖 + ∑ β𝑗 ln 𝐵𝑡−𝑗 + 𝜖1𝑡𝑝𝑗=1

𝑝𝑖=1 (6)

ln 𝐵𝑡 = ∑ γ𝑖 ln 𝐵𝑡−𝑖 + ∑ δ𝑗 ln 𝐴𝑡−𝑗 + 𝜖2𝑡𝑝𝑗=1

𝑝𝑖=1 (7)

Where ln 𝐴 and ln 𝐵 are log prices of two rice markets among the five studied in this paper. In

equation (6), the null hypothesis is 𝐻0: 𝛽1 = 𝛽2 = ⋯ = 𝛽𝑖 = 0 , indicating that ln 𝐵𝑡 does not

Granger cause ln 𝐴𝑡. In equation (7), the null hypothesis is 𝐻0: δ1 = δ2 = ⋯ = δ𝑖 = 0, indicating

that ln 𝐴𝑡 does not Granger cause ln 𝐵𝑡. A rejection of the null hypothesis in both equations would

suggest that there is a bi-directional causal relationship between the two variables.

25

Lastly, the impulse response functions (IRFs) and the variance decomposition are employed to

analyze the short-run dynamics of the rice prices. The purpose of those methods is to quantify the

impact of the shocks in each of the variable. The IRFs give an estimate of the response of a variable

to a one standard deviation shock in another variable. IRFs is a practical way to assess the direction,

magnitude and persistence of shocks, and thus provides information about the relations between

markets. Moreover, the variance decomposition analysis provides information about the proportion

of the movements in response to other variables.

26

5. Empirical Results

First, unit root tests for the whole and sub-periods are conducted using two different methods,

Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests. Table 6 presents the result of unit

root tests, showing that all the series are non-stationary at their level both in ADF and PP tests.

Specifically, the null hypothesis that there is a unit root cannot be rejected even at the 10% critical

value. Then, we conducted a unit root test for first differenced variables. Under the first differences

form, the null hypothesis can be rejected at the 1% confidence level. Thus, we concluded that all

variables became stationary in the first differences, meaning all the series are integrated of the same

order.

Table 6. Unit root tests

Whole period: October 1987-September 2016

Market Level First-difference

ADF PP ADF PP

Arkansas -0.120987 -0.083128 -10.43321*** -10.33390***

Thailand 0.151649 0.155205 -11.86694*** -11.71961***

California 0.269735 0.220934 -17.11691*** -17.21125***

Korea 0.184848 0.213313 -12.44312*** -12.24129***

Sub-period 1: October 1987-December 1994


ADF PP ADF PP

Arkansas -0.505780 -0.543925 -5.760685*** -5.761197***

Thailand -0.016108 -0.076953 -6.765567*** -6.759464***

California 0.062161 0.062472 -6.962897*** -7.085897***

Korea 2.480562 1.847999 -6.238619*** -6.235822***

Sub-period 2: January 1995-September 2016


ADF PP ADF PP

Arkansas 0.172740 0.308399 -8.092637*** -8.154351***

Thailand 0.154259 0.221511 -10.37027*** -9.631533***

California 0.306394 0.275544 -15.15460*** -15.15203***

Korea -0.269157 -0.233977 -10.86641*** -9.781304***

Japan -0.565515 -0.537279 -11.57323*** -11.63388***

Note: *, **, *** denote significance at 10%, 5%, and 1% respectively.

27

5.1 Cointegration tests

Next, we conducted multivariate cointegration tests to examine long-run relationships among rice

markets. Lag lengths are determined by following Akaike information criterion (AIC) respectively

for each analysis. Table 7 shows the result of multivariate cointegration tests for the first sub-period.

Trace statistics indicate that cointegrating vector is one in four rice markets: Arkansas, California in

the United States, Thailand, and Korea. On the other hand, maximum eigenvalue statistics fail to

reject the null hypothesis that the cointegrating vector is equal to zero in those markets. Johansen and

Juselius (1990) note that the power of the trace test is lower than the maximum eigenvalue test, hence

they suggest that the maximum eigenvalue test may be better. Therefore, we conclude that there is no

cointegration relationship among four rice prices according to maximum eigenvalue tests.

Multivariate cointegration tests also confirm that the cointegrating vector is one among Arkansas,

Thai and Californian rice both in trace and maximum eigenvalue test. Thus, we can conclude that the

international rice markets had a long-run relationship before the UR agreement. However, the tests

show that there is no long-run relationship among Indica rice (Arkansas and Thai rice) and Korean

rice.

Table 8 shows the result of multivariate cointegration tests for the second period. In this sub period,

we also include Japanese rice price, and find that there is no long run relationship among five rice

markets based on the maximum eigenvalue test. On the other hand, multivariate cointegration tests

confirm that there are two cointegrating vectors among Arkansas, Thailand and California both in

trace and maximum eigenvalue test. It means that the linkages became stronger in the second period

than that of first period. While mixed results are shown between Korean and Indica rice prices, also

among Japanese and Indica rice prices. Specifically, trace tests confirm that there is one cointegrating

vector between Indica and Korean rice prices, and between Indica and Japanese rice prices. However,

maximum eigenvalue tests confirm that cointegrating vector is zero in both cases. Based on the

28

Johansen and Juselius (1990), we may conclude that there is no long-run linkage among those

markets. Hence, we failed to reject the null hypothesis that cointegrating vector is zero among

Californian, Korean and Japanese rice prices in both trace and maximum eigenvalue tests. It shows

that even those rice are the same type, Japonica rice, they have no long run linkage for the second

period.

Then, we employed bivariate cointegration tests for the first period to examine the long-run

relationship between two rice markets. Table 9 indicates that we can reject the null hypothesis that

the cointegrating vector is equal to zero between Arkansas and Californian prices at the 5% significant

level. In addition, we cannot reject the null hypothesis that there is, at most, one long-run relationship

between variables. Thus, the results suggest that those markets are cointegrated and have a long-run

relationship. There is also one cointegration between Thai and Californian prices in both tests. For

Korean rice price, however, there is no long-run relationship with any other markets. Moreover, the

results also confirm that there is no long-run linkage between Arkansas and Thailand.

Table 10 presents the result of bivariate cointegration tests for the second sub-period. The tests

confirm that there is one cointegrating vector between Arkansas and Thailand, Arkansas and

California, and California and Thailand at the 5% significant level. For Korean and Japanese rice

prices, however, there is no long-run relationship with any other markets. Therefore, cointegration

tests confirm that Korean rice price are separated to other rice markets both before and after the UR

agreement. It is not only with Indica rice but also with Japonica rice, such as Californian and Japanese

rice. Japanese rice also show that their market separated to other rice markets even after the

tariffication in 1999.

29

Table 7. Multivariate cointegration tests (October 1987-December 1994)

H0 H1 Trace test Max-eigenvalue test

Statistic C. V. (5%) Statistic C. V. (5%)

Arkansas,

Thailand,

California,

Korea

r=0 r≥1 54.54683* 47.85613 26.90466 27.58434

r≤1 r≥2 27.64217 29.79707 16.17702 21.13162

r≤2 r≥3 11.46515 15.49471 10.19443 14.26460

r≤3 r≥4 1.270717 3.841466 1.270717 3.841466

Arkansas,

Thailand,

California

r=0 r≥1 30.27903* 29.79707 21.91960* 21.13162

r≤1 r≥2 8.359434 15.49471 7.353141 14.26460

r≤2 r≥3 1.006294 3.841466 1.006294 3.841466

Arkansas,

Thailand,

Korea

r=0 r≥1 45.70614* 29.79707 24.59103* 21.13162

r≤1 r≥2 21.11511* 15.49471 15.06920* 14.26460

r≤2 r≥3 6.045908* 3.841466 6.045908* 3.841466

Note: * denotes rejection of the hypothesis at the 0.05 level.

Table 8. Multivariate cointegration tests (January 1995-September 2016)



Five selected

rice markets

r=0 r≥1 73.94591* 69.81889 30.94408 33.87687

r≤1 r≥2 43.00183 47.85613 16.60583 27.58434

r≤2 r≥3 26.39600 29.79707 13.85663 21.13162

r≤3 r≥4 12.53937 15.49471 10.24371 14.26460

r≤4 r≥5 2.295659 3.841466 2.295659 3.841466

Arkansas,

Thailand,

California

r=0 r≥1 37.89296* 29.79707 21.63187* 21.13162

r≤1 r≥2 16.26109* 15.49471 15.04972* 14.26460

r≤2 r≥3 1.211368 3.841466 1.211368 3.841466

Arkansas,

Thailand, Korea

r=0 r≥1 32.80749* 29.79707 18.95551 21.13162

r≤1 r≥2 13.85199 15.49471 11.35940 14.26460

r≤2 r≥3 2.492583 3.841466 2.492583 3.841466

Arkansas,

Thailand, Japan

r=0 r≥1 31.27547* 29.79707 16.85649 21.13162

r≤1 r≥2 14.41898 15.49471 12.17105 14.26460

r≤2 r≥3 2.247926 3.841466 2.247926 3.841466

California,

Korea, Japan

r=0 r≥1 27.43560 29.79707 12.54976 21.13162

r≤1 r≥2 14.88584 15.49471 10.70498 14.26460

r≤2 r≥3 4.180861* 3.841466 4.180861* 3.841466


30

Table 9. Bivariate cointegration tests (October 1987-December 1994)



Arkansas-

Thailand

r=0 r≥1 27.25952* 15.49471 21.22324* 14.26460

r≤1 r≥2 6.036272* 3.841466 6.036272* 3.841466

Arkansas-

California

r=0 r≥1 17.17774* 15.49471 17.00184* 14.26460

r≤1 r≥2 0.175902 3.841466 0.175902 3.841466

Thailand-

California

r=0 r≥1 17.49285* 15.49471 15.77428* 14.26460

r≤1 r≥2 1.718563 3.841466 1.718563 3.841466

California-

Korea

r=0 r≥1 20.50166* 15.49471 15.23943* 14.26460

r≤1 r≥2 5.262234* 3.841466 5.262234* 3.841466

Thailand-

Korea

r=0 r≥1 31.39669* 15.49471 17.14525* 14.26460

r≤1 r≥2 14.25144* 3.841466 14.25144* 3.841466

Arkansas-

Korea

r=0 r≥1 27.65983* 15.49471 16.35884* 14.26460

r≤1 r≥2 11.30099* 3.841466 11.30099* 3.841466


Table 10. Bivariate cointegration tests (January 1995-September 2016)



Arkansas-

Thailand

r=0 r≥1 17.35442* 15.49471 15.03198* 14.26460

r≤1 r≥2 2.322439 3.841466 2.322439 3.841466

Arkansas-

California

r=0 r≥1 18.28342* 15.49471 16.12635* 14.26460

r≤1 r≥2 2.157067 3.841466 2.157067 3.841466

Thailand-

California

r=0 r≥1 17.60124* 15.49471 16.46213* 14.26460

r≤1 r≥2 1.139109 3.841466 1.139109 3.841466

California-

Korea

r=0 r≥1 13.68827 15.49471 9.706270 14.26460

r≤1 r≥2 3.981997* 3.841466 3.981997* 3.841466

Thailand-Korea r=0 r≥1 14.46976 15.49471 12.15885 14.26460

r≤1 r≥2 2.310913 3.841466 2.310913 3.841466

Arkansas-Korea r=0 r≥1 17.44484* 15.49471 12.15731 14.26460

r≤1 r≥2 5.287535* 3.841466 5.287535* 3.841466

Arkansas-Japan r=0 r≥1 13.00948 15.49471 9.090599 14.26460

r≤1 r≥2 3.918876* 3.841466 3.918876* 3.841466

Thailand-Japan r=0 r≥1 13.02053 15.49471 10.81862 14.26460

r≤1 r≥2 2.201908 3.841466 2.201908 3.841466

31

California-

Japan

r=0 r≥1 12.86215 15.49471 10.28936 14.26460

r≤1 r≥2 2.572795 3.841466 2.572795 3.841466

Korea-Japan r=0 r≥1 22.48477* 15.49471 12.29396 14.26460

r≤1 r≥2 10.19081* 3.841466 10.19081* 3.841466


5.2 Causality tests

Table 11 provides the result of the Granger causality tests for the first period. It shows that

bidirectional causal relation exists between rice prices of United States (Arkansas and California) at

the 5% significant level. Moreover, there is unidirectional linkage between prices of Thailand and

U.S. Specifically, Thailand acts as a price leader in those markets. There is price transmission from

Thailand to California, and to Arkansas. It can be easily understood because Thailand was the biggest

rice exporter for the first period, from 1987 to 1994. For the Korean rice price, on the other hand, we

cannot reject the null hypothesis at 5% critical value. Therefore, we may conclude that Korean rice

market had no causal relationship with other markets for the first period.3

Table 12 shows the result of causality test for the second period. It shows that bidirectional price

transmission exists across the Indica rice prices. Specifically, rice prices in Arkansas and Thailand

have a bidirectional causal relationship that is statistically significant at 5% critical level. While

Californian rice price has only one-way relationship with Indica rice prices from Indica to Californian

rice. Therefore, Indica rice markets act as a price leader among international rice markets in the

second period. It is also reasonable because they account more than 70% of global trade after the

trade liberalization. On the other hand, there is no price transmission between Korean and other

3 Korean rice price has causal relationship with Arkansas and Thailand at 10% critical value, but we may think those

results as an exchange rate effect. After conducting the causality test with Korean currency, we found that most of causal

relationships disappeared even at 10 % significance level.

32

markets only except for the causal relationship from Thailand to Korea. This exception can be

explained as the effect of exchange rates. Specifically, we also conduct the Granger causality test with

Korean local currency. According to the Granger causality tests with Korean currency, causal relation

from Thailand to Korea disappeared. Hence, there is no causal relation between Korean rice and other

rice markets. Therefore, it implies that the linkage appeared due to the variation of exchange rate not

because of the actual causal relation. In addition, Japanese rice market has no causal relationship with

other markets except for the linkage from Japanese rice to Arkansas rice price. However, this causal

relation also disappeared when conducting the test with Japanese currency. Based on the causality

tests, we could conclude that Korean and Japanese rice market still distinct from international rice

markets even after the trade liberalization.

Table 11. Causality tests (October 1987-December 1994)

Arkansas Thailand California Korea

Arkansas→ 1.80313 3.87597*** 3.00756*

Thailand→ 3.50953*** 4.24161*** 4.24428*

California→ 2.15206** 1.39059 0.67487

Korea→ 2.93730* 0.20282 0.23139

Note: ***, **, * rejection of the null hypothesis at 1%, 5% and 10% respectively

Table 12. Causality tests (January 1995-September 2016)

Arkansas Thailand California Korea Japan

Arkansas→ 3.13620** 3.89101*** 0.63906 0.19322

Thailand→ 7.37870*** 9.74809*** 3.11587*** 0.17754

California→ 0.67491 1.46851 0.59705 0.44954

Korea→ 1.02942 1.28973 0.32595 1.21179

Japan→ 3.37261* 0.52067 1.00874 0.99551

Note: ***, **, * rejection of the null hypothesis at 1%, 5% and 10% respectively

33

5.3 Impulse response and variance decomposition analyses

Figure 9 and 10 present the impulse responses for the first and second periods of selected rice markets,

respectively. Figure 9 confirms that changes on the international rice price generally bring the

responses each other. Specifically, the first line shows the response of Thailand’s price to a shock

originating in prices of Arkansas. The impact of the shock gradually rises until 5 month, and persists

until 6 month. The responses of Arkansas price to a shock from Thailand’s price show that the shock

persists only until 2 month. Responses of Californian price to the shock from Arkansas price persist

until 7 month. Arkansas price responses to a shock from Californian rice only until 3 month. However,

between Californian and Thai prices, there is no response each other in the first period. Therefore, we

generally found that short-run linkage exists between international rice prices, but it was weak in the

first period. Meanwhile, the changes of international rice prices have no linkage with Korean price.

The lines from 4 to 6 show the impulse responses of the Korean rice price, and the dotted lines

represent the critical values. We confirm that shocks originating in the international market are not

transmitted to Korean rice market, and vice versa. Those results may help clear up the mixed results

obtained from the previous cointegration and causality tests.

From observing Figure 10, one can see that the impact of shocks has increased and remains longer

times compared to that of first period. For example, the first line shows the response of Thailand’s

price to a shock from Arkansas price. The impact of the shock gradually increases until around 5

month, and it stays until 29 month. Moreover, the response of Arkansas price to Thai price shock also

shows that the shock persists until 23 months. The stronger linkages also have shown between

Arkansas and Californian price. The response of Californian price to a shock from Arkansas price

shows that the shock persists from 3 to 30 month. Moreover, the magnitudes stay over 0.02 in those

periods. The price transmission from Arkansas to Californian price persists until 18 month. There is

only one-way response from Thai to Californian rice for 8 month. However, Korean and Japanese

34

rice prices found to have no price transmission with any other rice markets even after the trade

liberalization. Those results are in the line with the previous cointegration and causality tests.

Figure 9. Impulse responses for the first period (October 1987-December 1994)

Response of Thai to Arkansas price Response of Arkansas to Thai price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Californian to Arkansas price Response of Arkansas to Californian price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Californian to Thai price Response of Thai to Californian price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

35

Response of Korean to Californian price Response of Californian to Korean price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Korean to Thai price Response of Thai to Korean price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Korean to Arkansas price Response of Arkansas to Korean price

-.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.08

-.06

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Cholesky ordering: Korean, Californian, Arkansas, Thai rice prices

36

Figure 10. Impulse responses for the second period (Jan. 1995-Sep. 2016)

Response of Thai to Arkansas price Response of Arkansas to Thai price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Californian to Arkansas price Response of Arkansas to Californian price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Californian to Thai price Response of Thai to Californian price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

37

Response of Korean to Californian price Response of Californian to Korean price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Korean to Thai price Response of Thai to Korean price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Korean to Arkansas price Response of Arkansas to Korean price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

38

Response of Japanese to Arkansas price Response of Arkansas to Japanese price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Japanese to Thai price Response of Thai to Japanese price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Response of Japanese to Californian price Response of Californian to Japanese price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

39

Response of Korean to Japanese price Response of Japanese to Korean price

-.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35 -.04

-.02

.00

.02

.04

.06

.08

5 10 15 20 25 30 35

Cholesky ordering: Korean, Japanese, Californian, Arkansas, Thai rice prices

The results of variance decomposition are shown in Table from 13 to 17. We found that international

rice prices are generally well linked each other. Hence, Indica rice (Arkansas and Thai rice) are

explained more each other than Californian rice in both sub-periods. For example, Table 13 reports

the variance decomposition of Arkansas price after 12, 24 and 36 month. For the first period of

Arkansas price, 11.45% is explained by the Thai price and 10.89% is explained by Californian price

after 12 months. It then changes to 12.37% and 10.56% respectively after 3 years. For the second

period, those values increased to 24.08% and 16.96% respectively.

Table 14 shows the variance decomposition of Thai rice price. For the first period of Thai price, 34.74%

is explained by Arkansas price, and 4.38% is explained by Californian price after 12 month. Moreover,

those values are increased to 36.71% and 4.55% after 36 month, respectively. On the other hand, for

the second period, 28.53% is explained by Arkansas price, and 11.98% is explained by Californian

price after 36 month. Moreover, Thai rice price are much less likely to affected by Californian rice

price. Nonetheless, the effects have increased for the second period compared to that of the first period.

Table 15 reports the variance decomposition of Californian price for 12, 24 and 36 month. For the

first period of Californian price, 18.85% is explained by the Arkansas price and 7.93% is explained

by Thai price after 12 months. It then changes to 18.82% and 10.64% respectively after 3 years. For

40

the second sub-period, those values are further increased. Specifically, 23.24% is explained by

Arkansas price and 12.54% is explained by Thai price after three years. Therefore, we may conclude

that international rice prices became more linked each other for the second period. On the other hand,

Korean and Japanese rice prices have merely effected on international prices.

Lastly, table 16 and 17 show the variance decomposition of Korean and Japanese rice, respectively.

The results show that those two markets are highly exogenous in global rice markets. For example,

for the first period of Korean price, 4.63% is explained by Arkansas price, 7.96% by Thai price and

1.86% by Californian price after 36 month. Moreover, those values further decreased in the second

period to 3.43%, 0.82% and 3.61% after 36 month, respectively (Table 16). Therefore, Korean rice

market is merely affected by other rice markets both before and after the UR agreement. For the

second period of Japanese price, 0.60% is explained by Arkansas price, 2.96% by Thai price and 3.28%

by Californian price after 36 month (Table 17). It means that even after the rice market opening in

1999, Japanese rice market has hardly affected by other rice prices and vice versa. Those results also

support the previous cointegration and causality tests.

Table 13. Variance decomposition of Arkansas rice price

Period 1: October 1987-December 1994

Month Arkansas Thailand California Korea

12 77.24749 11.45368 10.88657 0.412259

24 76.58768 12.24158 10.55193 0.618809

36 76.44537 12.36826 10.55852 0.627850

Cholesky ordering: Korean, Californian, Arkansas, Thai rice price

Period 2: January 1995-September 2016

Month Arkansas Thailand California Korea Japan

12 68.15245 16.73073 7.293360 3.994924 3.828541

24 52.29349 22.68281 14.05242 4.512066 6.459205

36 47.35712 24.07951 16.95666 3.725760 7.880955

Cholesky ordering: Korean, Japanese, Californian, Arkansas, Thai rice price

41

Table 14. Variance decomposition of Thai rice price



12 34.74415 56.93759 4.376582 3.941674

24 36.57487 55.05152 4.533917 3.839690

36 36.70996 54.91382 4.547474 3.828744




12 26.08447 64.99929 3.596066 0.008486 5.311693

24 27.92737 56.12975 8.828951 0.010007 7.103924

36 28.53061 51.64914 11.97977 0.016251 7.824233


Table 15. Variance decomposition of Californian rice price



12 18.85033 7.925021 70.71092 2.513730

24 18.76761 10.55399 67.93054 2.747859

36 18.81688 10.63641 67.76238 2.784332




12 13.63912 8.092711 77.64655 0.125416 0.496196

24 20.98140 10.69929 67.12967 0.107276 1.082359

36 23.23709 12.53872 62.36149 0.149985 1.712719


Table 16. Variance decomposition of Korean rice price



12 3.143592 7.034525 1.541228 88.28066

24 4.573444 7.862390 1.864383 85.69978

36 4.627173 7.962769 1.864753 85.54531




12 1.138560 0.645674 2.977430 94.29987 0.938465

24 3.332715 0.832534 3.628779 89.02320 3.182769

36 3.431345 0.822647 3.611258 88.46916 3.665587

42


Table 17. Variance decomposition of Japanese rice price



12 0.526817 1.004949 1.145629 1.477851 95.84475

24 0.479614 2.314741 2.703909 4.873799 89.62794

36 0.595043 2.960167 3.275268 5.884440 87.28508


43

6. Conclusion

The global rice market is generally considered a volatile and thin market due to the low proportion of

rice trade the world over. One of the reasons for this is that the major rice-importing and rice-exporting

countries have protected their respective markets through border protection and export restrictions.

Rice is a main source of income as well as a politically sensitive crop in such countries. Especially,

the Asian countries have highly relied on the rice economy, and Japan and Korea are among such

countries. They had strictly secured their domestic rice markets but started to open these through the

UR agreement under MMA. Moreover, Japan and Korea returned to the tariffication system in 1999

and 2015, respectively. Even though Japan and Korea opened their respective rice markets, they are

still considered protective markets in the global rice trade. This is because these countries have

implemented several price and income support programs in rice farming. In addition, a large portion

of their imported rice is used for purposes other than as foods, for which reason it affects the domestic

rice markets less. Therefore, in this study, whether the two aforementioned markets have actually

been separated from the global rice market since after the implementation of the UR agreement was

determined. Generally, the measurement of market integration has been viewed as a basic mechanism

of understanding how specific markets work (Ravallion, 1986). Thus, cointegration and causality

tests were conducted to examine the existence and direction of market integration among rice markets.

Especially, the periods before and after the implementation of the UR agreement in 1995 were focused

on.

Three major study results were obtained. First, there is a long-run relationship among the rice

exporters in both subperiods. According to the results of the multivariate cointegration tests, the rice

prices in Thailand, Arkansas, and California are integrated with one another. The integrating vector

was 1 for the first period, and it changed to 2 for the second period. The bivariate cointegration tests

also confirmed that the rice-exporting markets are generally well integrated with one another. The

44

Granger causality tests for the first period showed that bidirectional price transmission exists between

the rice prices in Arkansas and California. Hence, there is one-way price linkage between the Thai

and U.S. rice prices: from the Thai to the U.S. prices. This is reasonable because Thailand was the

largest rice exporter in the first subperiod. Thus, Thailand acts as a price leader for the global rice

markets. For the second period, the causality test confirmed that there is a bidirectional price linkage

between the Indica rice prices in Arkansas and Thailand. There is one-way transmission, however,

between Californian and Indica rice: from the Indica to the Californian rice prices. This is also

understandable because Indica rice accounts for 75% of the global rice trade. Thus, Indica rice

dominates the international rice trade as a leader for the second subperiod. The impulse response and

variance decomposition analyses also confirmed that the changes in the prices set by the rice exporters

are generally responses to one another. Moreover, the impact of shocks remained for a longer time in

the second period compared to the first period.

Second, the Korean and Japanese rice were found to have no long-run relationship with the other rice

markets in both periods. The multivariate cointegration tests for the first period confirmed that there

is no cointegrating vector among the rice markets in Arkansas, California, Thailand, and Korea. The

second period also showed that there is no long-run relationship among the five selected rice markets,

namely those of Arkansas, Thailand, California, Korea, and Japan. This was also found in the results

of the bivariate cointegration tests, showing that there is no linkage between the Korean and global

rice markets and also between the Japanese and global rice markets. The Grander causality tests

confirmed that the Korean and Japanese rice prices have no causal relationship with the other rice

prices. This was clearly shown in the analysis with the local currency. In the impulse response

function, the Korean and Japanese rice prices have no response to a shock from any other rice markets,

and vice versa. Thus, it can be concluded that Korea and Japan are independent from the global rice

markets both in the long and short run for the whole periods. This means that both markets have been

45

completely isolated from the international rice markets even after their rice market opening.

Third, it may be expected that the Korean rice market will be temporarily isolated from the global

rice market based on the Japanese market for the second period. Through the UR agreement in 1994,

Japan agreed to import rice under the TRQ. Specifically, 682,000 tons (about 6.4% of the base year’s

consumption) of rice are imported annually. Much of the imported rice, however, was used for

processing and as feeds and food aid. Thus, even after the tariffication in 1999, Japan imported only

100 tons of out-of-quota rice per year, and the amount further decreased to around 50 tons in 2009.

Moreover, the Japanese government has introduced a series of income support programs: Rice

Farming Income Stabilization Program in 1998, Direct Payment Program for Paddy- and Upland-

Field Farming in 2007 to more-than-4-ha farms, and Income Support Direct Payment Program in

2010 to all farmers (Fukuda et al., 2003; Kako, 2013). Through these protective measures, Japan was

able to stabilize its rice market. These actions, however, have isolated the Japanese rice market from

the global rice markets even after the agricultural trade liberalization. In this regard, it may be

expected that the Korean rice market will also follow the Japanese rice market flow to some extent.

This is because Korea also imposed a high tariff over MMA and set a special safeguard (SSG) as well

as the rice direct payment to protect the domestic market. Thus, even though Korea switched to

tariffication in 2015, it may be expected that the Korean rice market will also be isolated from the

global rice markets for a while. In the long-term perspective, however, the border protection measures

will be continuously reduced in the future as a result of several agricultural trades. Moreover, the

income support program in the rice sector may be gradually abolished, as in Japan, because of the

heavy burden that imposes on the budget as well as the rice oversupply issue. Under these

circumstances, the Korean rice market will inevitably compete with the global rice markets.

46

References

Acharya, S. S., Chand, R., Birthal, S. K., & Negi, D. S. (2012). Market integration and price

transmission in India: A case of rice and wheat with special reference to the world food crisis of

2007/08. Rome: Food and Agriculture Organization.

Ahmad, B., & Gjølberg, O. (2015). Are Pakistan’s Rice Markets Integrated Domestically and With

the International Markets?. SAGE Open, 5(3), 2158244015596791.

Alam, M. J., Buysse, J., McKenzie, A. M., Begum, I. A., Wailes, E. J., & Van Huylenbroeck, G.

(2012). The dynamic relationships between world and domestic prices of rice under the regime

of agricultural trade liberalization in Bangladesh. Journal of the Asia Pacific economy, 17(1),

113-126.

Childs, N., Hansen, J., Evans, M. R., & Pointer-Napper, W. (2005). Rice situation and outlook

yearbook. US Department of Agriculture, Economic Research Service, 5.

Cho, S. J., & Park, H. H. (2014). Changes of Rice Import Policy in Korea Agriculture Market. The

Journal of Korea Research Society for Customs, 15(3), 109-133.

Choi, S., Dyck, J., & Childs, B. (2016a). The Rice Market in South Korea. US Department of

Agriculture.

Choi, S., Myers, M. A., & Soley, G. T. (2016b). Grain and Feed Update Report. GAIN Report KS1619,

Jun. 28, 2016. USDA, Foreign Agricultural Service.

Choi, S., & Myers, M. A. (2016). Grain and Feed 2016 Annual Report. GAIN Report KS1613, March

30, 2016. USDA, Foreign Agricultural Service.

Choi, S., & Smith, G. H. (2012). Grain and Feed Annual Report, 2012. GAIN Report KS1230, April

17, 2012. USDA, Foreign Agricultural Service.

Chulaphan, W., Chen, S. E., Jatuporn, C., & Huang, W. C. (2013). Different Causal Relationships of

Export Rice Prices in the International Rice Market. American-Eurasian J. Agric. & Environ.

47

Sci., 13(2), 185-190.

Dawson, P. J., & Dey, P. K. (2002). Testing for the law of one price: Rice market integration in

Bangladesh. Journal of International Development, 14(4), 473-484.

Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series

with a unit root. Journal of the American statistical association, 74(366a), 427-431.

Dorosh, P., & Wailes, E. (2010). The international rice trade: Structure, conduct and performance.

Rice in the Global Economy: strategic research and policy issues for food security.

Durand-Morat, A., & Wailes, E. J. (2011). Rice trade policies and their implications for food security.

In Joint Annual Meeting of Agricultural & Applied Economics Association (AAEA), 24-26.

Fukuda, H., Dyck, J. H., & Stout, J. (2003). Rice sector policies in Japan. US Department of

Agriculture, Economic Research Service.

Granger, C. W. (1969). Investigating causal relations by econometric models and cross-spectral

methods. Econometrica: Journal of the Econometric Society, 424-438.

Han, D. B., Shin, J. K., & Son, H. J. (1999). Economic Impacts of Rice Market Liberalization: A

comparative Study between Quotas and Tariffs. Korean Journal of Agricultural Economics,

40(1), 63-84.

Hossain, M. I., & Verbeke, W. (2010). Evaluation of rice markets integration in Bangladesh. The

Lahore Journal of Economics, 15(2), 77.

Im, J. B., Han, D. B., & Suh, J. K. (2005). Quantifying Transmission Effect of Major Rice Production

Countries on World Market and Policy Implication. Journal of the Korean Society of

International Agriculture, 17(4), 225-231.

Im, J. B. (2013). Overview of Agricultural Situation and Policy in Korea. [Online] Available at:

http://ap.fftc.agnet.org/ap_db.php?id=49 [Accessed 30 December 2016].

Ismet, M., Barkley, A. P., & Llewelyn, R. V. (1998). Government intervention and market integration

http://ap.fftc.agnet.org/ap_db.php?id=49

48

in Indonesian rice markets. Agricultural Economics, 19(3), 283-295.

Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of economic dynamics and

control, 12(2), 231-254.

Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—

with applications to the demand for money. Oxford Bulletin of Economics and statistics, 52(2),

169-210.

John, A. (2013). Price relations between export and domestic rice markets in Thailand. Food Policy,

42, 48-57.

John, A. (2014). Price relations between international rice markets. Agricultural and Food Economics,

2(1), 1-16.

Kako, T., Gemma, M., & Ito, S. (1997). Implications of the minimum access rice import on supply

and demand balance of rice in Japan. Agricultural Economics, 16(3), 193-204.

Kako, T. (2013). Trade Liberalization and Rice Farming in Japan and Heilongjiang China. [Online]

Available at: http://ap.fftc.agnet.org/ap_db.php?id=101 [Accessed 30 December 2016].

Kim, B. S., & Kim, M. H. (2004). An Analysis on the Impact of Market Liberalization and Policies

in Korea Rice Agriculture. Korean Journal of Agricultural Economics, 45(4), 1-32.

Kim, C. S., & Lee, S. H. (2005). The Implication of the Rice Negotiation Results Using Dynamic

CGE Model. Korean Journal of Agricultural Management and Policy, 32(4), 627-648.

Kim, D. M. (1995). 연구 노트: WTO 체제하 일본의 농산물 수입관리와 시사점 (Implications of

Japan’s Import Control under the WTO). Journal of Rural Development, 18(1), 109-129.

Kim, T. G., & Jung, T. G. (2004). 일본과 대만의 쌀 시장개방과 시사점 (Implications of the Rice

Market Opening in Japan and Taiwan). Korea Rural Economic Institute (KREI).

Lee, H. Y., & Cho, G. D. (2010). A Study on the Possibility of the Formation of Integrated Market

between Japanese and Imported Rice in Japanese Rice Market. The Korean Journal of

http://ap.fftc.agnet.org/ap_db.php?id=101

49

Agricultural Economics, 51(1), 45-60.

Lee, J. H., & Kim, T. H. (2000). Choice of Korean Rice Industry: Special Treatment and Tariffication

Scenario. Korean Journal of Agricultural Management and Policy, 41(3), 1-22.

Lee, Y. K. (2001). Border Protection Measures for the Korean Rice Industry: Is the Tariffication

Unacceptable Choice?. Korean Journal of Agricultural Economics, 42(3), 1-21.

Maclean, J., Hardy, B., & Hettel, G. (2013). Rice Almanac: Source Book for One of the Most

Important Economic Activities on Earth. IRRI.

Marton, R. (2014). Rice: A Global History. Reaktion Books.

Muthayya, S., Sugimoto, J. D., Montgomery, S., & Maberly, G. F. (2014). An overview of global rice

production, supply, trade, and consumption. Annals of the New York Academy of Sciences,

1324(1), 7-14.

Nga, N. T. D., & Lantican, F. A. (2009). Spatial integration of rice markets in Vietnam. Asian Journal

of Agriculture and Development, 6(1), 14.

OECD Publishing. (2014). Agricultural Policy Monitoring and Evaluation 2014: OECD Countries.

OECD Publishing.

Park, D. G. (1996). 연구 노트: 일본의 수입쌀 관리 현황과 시사점 (Implications of the Situation

of Imported Rice Management in Japan). Journal of Rural Development, 19(4), 147-157.

Park, J. H. (1997). A Comparative Study on the Impacts of the Importation of the Minimum Market

Access Rice on the Domestic Markets of Japan and Korea. Korean Journal of Agricultural

Economics, 38(1), 1-17.

Phillips, P. C., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2),

335-346.

Pingali, P. (2007). Westernization of Asian diets and the transformation of food systems: Implications

for research and policy. Food policy, 32(3), 281-298.

50

Ravallion, M. (1986). Testing market integration. American Journal of Agricultural Economics, 68(1),

102-109.

Shin, J. K., & Ito, S. (2009). Assessing the Impact of Tariffication on the Korean Rice Market. Korean

Journal of Agricultural Economics, 50(3), 21-42.

Silvapulle, P., & Jayasuriya, S. (1994). Testing for Philippines rice market integration: A multiple

cointegration approach. Journal of Agricultural Economics, 45(3), 369-380.

Sirikanchanarak, D., Liu, J., Sriboonchitta, S., & Xie, J. (2016). Analysis of Transmission and Co-

Movement of Rice Export Prices between Thailand and Vietnam. Springer International

Publishing, 333-346.

Song, J. H., Han, S. H., & Kim, D. S. (2014). 쌀 콩 수급동향과 전망 (Trend Analysis and

Forecasting of Supply and Demand of Rice and Soybean). Korea Rural Economic Institute

(KREI).

Takahashi, D. (2012). The distributional effect of the rice policy in Japan, 1986–2010. Food Policy,

37(6), 679-689.

United States International Trade Commission. (2015). Rice: Global Competitiveness of the U.S.

Industry.

USDA. (2016a). Crop Production 2015 Summary.

USDA. (2016b). Rice Yearbook 2016.

Wailes, E. J. (2005). Rice: Global trade, protectionist policies, and the impact of trade liberalization.

M. Ataman Aksoy and John C. Beghin, 2(576), 177.

Yang, S. R., & Cho, J. H. (1997). International Price Dynamics of Medium- and Long-Grain Rice.

Korean Journal of Agricultural Management and Policy, 24(1), 33-46.

Yavapolkul, N., Gopinath, M., & Gulati, A. (2006). Post–Uruguay Round price linkages between

developed and developing countries: the case of rice and wheat markets. Agricultural economics,

51

34(3), 259-272.

Zivot, E., & Wang, J. (2007). Modeling financial time series with S-Plus® (Vol. 191). Springer

Science & Business Media.

integration of global rice market after the … · 1.1 characteristics of the global rice market:...

Documents