Ls Models Ls Island Issue 03 Midsummer
- caroylnmad9
- Aug 19, 2023
- 1 min read
We test that individual shrimp price series are nonstationary in levels but stationary in first differences (23, 44, 45). This test examines whether spurious correlations could be induced by regressing levels of shrimp prices on covariates such as hypoxia. We next test for whether pairwise small and large shrimp prices are cointegrated and that size-based prices are proportional to each other (24, 46). Cointegration implies that when regressing a large shrimp price on a small shrimp price, the residuals are stationary and spurious correlation is not an issue. These two steps provide justification for our analysis of the effects of hypoxia on shrimp prices because they establish stable long-run price relationships as a market counterfactual. Regressing large shrimp price on small shrimp price and hypoxia then becomes a test of whether hypoxia causes a departure from this stable long-run relationship. The regression models take one of the two following forms that capture different degrees of substitutability between large and small shrimp (Fig. 1):
Ls Models Ls Island Issue 03 Midsummer
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