Transmission of Price and Volatiliy over Marketing Channel in Hanwoo Market: MGARCH-CCC and VCC Analyses

Abstract

This study analyzed the transmission of price and price volatility in the Hanwoo meat market using MGARCH-CCC and MGARCH-VCC models. This study specifically explores dynamic conditional correlations in both prices and volatilities over the marketing channel by considering relationships between the correlation of prices and that of price volatilities. The transmission of prices in the Hanwoo meat market has been actively studied to understand the market’s efficiency and the effect of leading prices in the marketing channel. However, most of the previous studies did not consider the relationship between the correlation of prices and that of volatilities. This study found that wholesale prices led to retail prices. Wholesale prices showed the presence of ARCH effect only, implying that a shock that occurred in a previous period affects price volatility this month, but the impact does not last long. Meanwhile, retail prices exhibited both ARCH effect and GARCH effect, indicating that the impact of a shock did not last for a long period of time. This study also found that a significant positive coupling behavior between wholesale and retail price volatilities, indicating that wholesale and retail markets share the risk. However, the coupling effect has decreased since the year 2015.