Asymmetry in Price Transmission of the Czech Wheat Agri-food Chain

Abstract

This article focuses on the assessment of the symmetry or asymmetry of price transmission in selected partial verticals of foodstuffs wheat in the Czech Republic, specifically of smooth flour, white baked goods and consumer bread. The asymmetry of price transmissions is examined in the relationship of agricultural producer price – industrial producer price and industrial producer price – consumer price. The analysis itself is based upon the concept of symmetrical and asymmetrical behavior, where the effect of positive and negative changes in prices on individual levels of the vertical to connecting levels is examined, as well as also symmetry and asymmetry of price transmissions between connecting price levels. For the fulfillment of the objective, adjusted vector error correction models and impulse-response analysis are utilized. The analysis is based upon time series of individual prices containing monthly data within the period of January 1999 – October 2011. The analysis itself showed that some relationships between prices on individual levels of the analyzed product verticals show a symmetrical nature, while other partial relationships are of an asymmetrical nature. However, from a comprehensive standpoint, verticals can be considered to be asymmetrical and the asymmetry can be called “upward asymmetry”. Further, the analysis shows a slow reaction of prices to unit price shocks, but even despite the length of the period, a new equilibrium level is reached after deviation from a state of equilibrium.