Asymmetric price transmission in the Spanish lamb sector

Abstract

This article investigates the non-linear adjustment between farm and retail prices in the lamb sector in Spain, using a three-regime Threshold Autoregressive Model. The results indicate that, in the long run, price transmission is perfect and any supply or demand shocks are fully transmitted along the marketing chain. In the short run, price adjustments between the farm and the retail levels are asymmetric and reveal a demand-pull transmission mechanism. On the other hand, retailers benefit from any shock, whether positive or negative, that affects supply or demand conditions. Copyright 2007, Oxford University Press.