Asymmetric price transmission along the supply chain of perishable agricultural commodities: A nonlinear ARDL approach

Abstract

This study aims to evaluate the asymmetric price transmission in terms of magnitude and speed between the wholesale and retail levels of the Sri Lankan fruit and vegetable markets. Using monthly data of wholesale and retail prices of 12 vegetable and three fruit varieties in Sri Lanka for the period 2005–2019, the study estimates a Nonlinear Autoregressive Distributed Lag (NARDL) model. Almost all food commodities used in this study (fruit and vegetables) show significant positive vertical asymmetry in price adjustments in the long run. The results indicate that the transmission rate of price increases in the wholesale market is greater than in the retail level when compared to price reductions in the wholesale market. This study suggests relevant policy options to explore and address this issue.