Price Transmission Analysis Research Articles

Spatial Interactions and Price Transmission in Yam Markets in Côte d'Ivoire

Spatial interactions are essential factors in the process of price transmission. However, very few studies have taken these factors into account in the analysis of price transmission. This study attempts to analyze the price transmission in the yam markets in Côte d’Ivoire by emphasizing on spatial interactions. To do this, based on the two types of data, rainfall and the price series of four varieties of yams (kponan, krenglè, assawa and bêtè-bètè) and cassava, the dynamic Durbin spatial model has been used. The results show that prices are transmitted both between markets and yam varieties. Indeed, the prices of krenglè and assawa varieties influence the price of the kponan variety. The rainfall also increases the price of the kponan variety. Therefore, it would be important to take into account the different varieties of yam in price stability reforms and encourage producers to produce more of these varieties. Out-of-season production will prevent risks from climatic hazards.

Market integration and price transmission analysis of foreign and Ghanaian beef and mutton markets; the effect of crude oil price and exchange rate fluctuations

Market integration and price transmission analysis of foreign and Ghanaian beef and mutton markets; the effect of crude oil price and exchange rate fluctuations

Analysis of rice price transmission in West Java, Indonesia

Analysis of rice price transmission in West Java, Indonesia

Threshold vector error correction model and transaction cost variation

ABSTRACT Our study assesses the performance of a threshold vector error correction model (TVECM) for the analysis of spatial price transmission. We specifically determine how inference about price regimes and the process of price adjustment to the established long-run equilibrium is affected when the stochastic transaction cost is exogenously or endogenously determined in fixed and flexible threshold models. The study first generates non-stationary but cointegrated price series and transaction costs based on true price transmission parameters: percentage of violations of spatial equilibrium, speed of price adjustment, threshold and inaction band using Monte Carlo simulations. Then, the generated data are used to estimate TVECMs under various assumptions on transaction cost variation and threshold specification. Finally, estimates of price transmission parameters are compared with the true parameters to evaluate the performance of model specifications. Our results indicate that the flexible TVECM accounting for transaction cost variation outperforms the standard fixed TVECM, which is consistent with findings from many previous studies in the literature. Our study also finds that although the flexible TVECM performs better than the fixed TVECM, it may not fully address the limitation of linear models when a real-world data represents a complex nonlinearity in the spatial price transmission.

Price transmission analysis of Irish butter export prices in the world butter market

Abstract In 2019, Ireland was the third-largest exporter of butter in the world butter market but Irish butter prices have been more volatile compared to other Irish dairy products. Yet, empirical research that examines the market price dynamics and international competitor behavior in the butter market remains scarce. The Vector Error Correction Model was applied to data from 1970–2019, to test the extent to which changes in competitor butter prices and Irish farm milk prices had an impact on Irish butter prices. The results provide evidence of asymmetric price transmissions, Irish butter prices were more responsive to shocks in New Zealand (NZ) butter prices and Irish farm milk prices in the long-run. Declining world milk prices over time, related to milk supply, perishability and storability factors, may prevent symmetric response of Irish milk prices to changes/shocks in Irish butter prices. Moreover, different target markets and EU/NZ policies for Ireland and NZ butter may prevent symmetric response of Irish butter prices to changes/shocks from NZ butter prices. Essentially, the take home message for the butter industry is that Irish butter prices must not be studied in isolation, NZ is a major butter competitor to Ireland in the world market and NZ butter prices play a significant role on how Irish butter prices change.

The Vertical Price Transmission in Pork Meat Production in the Czech Republic

The paper aims at vertical price transmission of the agri-food market in the Czech Republic. It is focused on the analysis of price transmission in pork meat by investigating the short-run and long-run relationships within the product and the speed of establishing the equilibrium relationship. For this purpose, there is employed specially VECM (Vector Error Correction Model), impulse-response analysis, and decomposition of variance of VECM, which show the system’s reaction. The applied approach considers five alternatives in the Johansen approach. The results suggest that there is an existence of the equilibrium relationship in vertical markets and this relationship is simultaneous and demand-driven. The impulse-response analyses show the response of the processing price to one standard deviation shock to the agriculture price from approximately 15–20 periods reaching long-run equilibrium. The response of the agriculture price to one standard deviation shock to the processing price reaching long-run equilibrium is also from approximately 15–20 periods.

Analysis of Asymmetric Price Transmission of Regional Potato Markets in Ecuador

This study analyzed spatial price transmission of potato markets in Ecuador. Price transmission is an essential indicator to understand a market system. To evaluate asymmetric price transmission between two spatial markets, the Nonlinear Autoregressive Distributed Lag (NARDL) model was applied in the study. The four major provinces such as Quito, Latacunga, Riobamba and San Gabriel of potato production are selected and spatial market data are collected from the System of Agriculture Pubic Information in Ecuador. The study found that there exist asymmetric price transmissions between Riobamba and Latacunga, and Riobamba and San Gabriel for long and short run. Quito and Latacunga, and Riobamba and Quito showed asymmetric price transmission for long run, but not for short run. The positive and negative effects of the long-run relationship between Riobamba and Quito and between Riobamba and San Gabriel are bigger than between other spatial markets. It is the first study to provide empirical information about regional potato markets.

When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry

AbstractWe analyze price transmission dynamics in the under‐investigated feed supply chain, applying a special case of the Threshold Vector Error Correction model where the cointegrating relationship is interrupted. Weekly Italian dairy feed and corn prices are used, finding evidence of asymmetric price transmission when the feed industry's margins are squeezed and highly volatile. The proposed Interrupted Threshold Cointegration model represents a valid complement to existing threshold and regime‐switching techniques, allowing for the application of an agile nonstructural error correction model when standard cointegration tests fail to detect any long‐run relationship between price series. [EconLit Citations: Q11, Q13, C24].

Asymmetric Price Transmission Analysis of the International Soybean Market

This study analyzed the asymmetric price transmission in the international soybean market, using data from the US (Chicago Futures), European (Rotterdam), Brazilian (Paranaguá), Argentinian (Rosario Futures and Rosario Spot), and Chinese (Spot and Futures) markets. The study looked at the price transmission between these markets over a period of almost 10 years, from September 2009 to May 2019. The Phillips-Perron unit root test was used to determine the order of integration of the time series. The Engle-Granger cointegration test failed to find any evidence of cointegration between the Chinese and Argentinian markets with any others of the international markets. The lack of cointegration was associated with highly government intervened markets. The cointegration and threshold test proposed by Enders and Siklos, succeeded in rejecting the Null hypothesis and finding cointegration among the series after structural breaks had been taken into account. The BDS test for nonlinearity showed that most of the time series were nonlinear, which prompted the investigation to look into nonlinear modelling. To evaluate asymmetric price transmission, the study used the Threshold autoregressive (TAR) model and the momentum threshold model (MTAR). The Argentine and Chinese markets were primarily suspected of exhibiting asymmetric price transmission due to structural government intervention. However, the test results failed to reject the null hypothesis and revealed asymmetric price transmission between these markets and the international market. As expected, the results found no evidence of asymmetric price transmission in the Paranaguá, Rotterdam, and Chicago markets. Hence, it can be concluded that symmetric price transmission is more prevalent in the global soybean market than asymmetric price transmission.

Market Integration and Price Transmission Analysis of Onion in Wholesale Markets of India

The present study was done in seven major onion wholesale markets in India, namely Pimpalgaon, Lasalgaon, Solapur, Pune, Bangalore, Hyderabad and Indore to explore the interdependence of wholesale prices amongst Indian onion markets. The study was conducted in all India perspective and the study period involves the seventeen years data of onion wholesale prices (January 2004 to December 2020). The study was majorly based on the prices of onion obtained through secondary source. These data were collected from various portals such as FAO, NHRDF, Agmarknet and NHB. The current study employs co-integration analysis of wholesale monthly onion prices in selected marketplaces to determine the degree of market integration. The Trace and Maximum Eigen-value tests results showed that the onion prices in India moves together in the long run equilibrium. As a result, it may be stated that India's onion markets are well-functioning. The direction of information flow was determined by using Granger Causality test. It was found that in few markets pairs, price transmissions were bi-directional whereas between Bangalore and Pune market, no transmission was found. The study reveals that Lasalgaon market is dominating in terms of price determination. The empirical study also recommends keeping a careful eye on diverse market behavioural patterns, since "news" in one market might have an influence on other markets due to the numerous interdependencies.

Price Transmission Analysis of the International Soybean Market in a Trade War Context

This study analysed the dynamics of the international soybean market using econometric techniques and economic models to study the impacts of the US–China trade war. It considered the analysis of “spatial” (horizontal) price transmission during an approximately ten-year period from September 2009 to May 2019 using monthly time-series data. The research focused on the leaders in the international soybean market, namely, China, the USA, the EU, Brazil and Argentina. Several econometric techniques were employed. The stationarity of the price time series was determined using the augmented Dickey–Fuller (ADF) unit root test. Structural breaks were inferred using the ADF test with a breaks test and a Bai–Perron multiple break test. The long-term relation/cointegration amongst the series was determined using the Johansen cointegration test (1988), with the previous breaks input as dummy variables. The direction of the causality was inferred using the Granger causality test (1969). The long-term and short-term causal relations were determined using the vector autoregression model (VAR) and the vector error correction model (VECM). The results showed a highly efficient and cointegrated market. The incidents of the trade war, as represented by tariffs and subsidies, had minor effects on the market efficacy, cointegration and price transmission. The arbitrage process of the studied market managed to get around the tariffs. In other words, there was no empirical evidence to support the claim that the law of one price (LOOP) did not hold.

Agricultural Grain Markets in the COVID-19 Crisis, Insights from a GVAR Model

The objective of this paper is to combine cross-commodity and spatial price transmission analysis to study the dynamics of the global cereal feed market during the COVID-19 pandemic. After reviewing the nascent literature on the impact of COVID-19 on agricultural markets, we discuss the different impact channels on prices. Then, we provide stylized market reactions of three relevant feed markets, wheat, barley, and maize, to a set of simulated possible future shocks on oil prices, stock-to-use ratios, and export restrictions. These three shocks are useful to assess what could be the consequences of policy responses to COVID-19 (export restrictions) or the disruptions due to the virus (stock-to-use reductions), in a context of lower oil prices. To generate these market reactions, we use a Global Vector Auto Regression (GVAR) model where each market is modelled independently, and connected through trade-based composite variables. We expand the work on the global wheat market by introducing maize and barley. The results of the empirical analysis indicate that the fall in the oil price may have contributed to the stability of the world grain market in early 2020, despite fears of supply chain disruption. We also note that export restrictions could significantly increase global prices, and that such restrictions could affect more than the targeted commodity, through significant cross-commodity price linkages.

Analysis of Rice Market Integration and Price Transmission in the North East-West Zones, Nigeria

Analysis of Rice Market Integration and Price Transmission in the North East-West Zones, Nigeria

Food Import Dependency and National Food Security: A Price Transmission Analysis for the Wheat Sector.

Agricultural trade liberalization and protecting domestic markets encompass conflicting policy goals. Even though after the food crisis in 2008, national governments of food-deficit nations aimed at reducing food supply dependency on external markets, no research has assessed the impacts of food import reliance on price or price volatility transmissions to local markets. We constructed a dynamic conditional correlation (DCC)–generalized autoregressive conditional heteroscedasticity (GARCH) model to examine whether wheat import dependency could make a country vulnerable to overseas shocks by analyzing the inter-relationships between the international wheat price and retail wheat flour prices in 10 net importing countries over the sample period from January 2005 to December 2019. It was found that retail price volatility in each region was positively correlated with international price volatility for most of the period concerned. We also discovered that external dependency could significantly protect the domestic market from the global one, implying that lowering wheat dependency on foreign markets improves “stability” and “availability” of food security without sacrificing “utilization”, but it may aggravate “access”.

Analysis of intra-region market integration and spatial price transmission in groundnut markets in Malawi

ABSTRACT Agricultural marketing has overwhelmingly received policy reforms indeveloping countries, Malawi included. In response to these policyreforms, extensive research on market cointegration has been conducted in evaluating the market performance of various agricultural commodities. In Malawi, literature on groundnut market cointegration is scanty. This study was aimed at understanding price co-movement in groundnut markets in Malawi. Agricultural Market Information System (AMIS) data on groundnut prices from 2005 to 2018 were used. The Vector Error Correction Model was used to analyse the extent of market cointegration, both in the long and the short run. The speeds of adjustments in groundnut markets were found to be very slow. It takes long for the systems to revert back to equilibriums in the long run. In all regions, very few markets are cointegrated. Although the speed of adjustment is slow in most of the cointegrating vectors, Southern region markets depict the fastest speed of adjustment towards long run equilibrium. Irrespective of the speed of adjustment, more markets are cointegrated in northern and central regions than in the southern region. Relevant policies are needed that promote smooth flow of information from surplus to deficit areas. Market infrastructure is also needed in the country.

Price Transmission in Agricultural Markets

We review recent developments in the analysis of price transmission in agricultural markets. Markets may be separated in time, form, and space (as well as in combinations of such factors). Transactions and storage costs as well as production and marketing factors delineate these markets. We show that much of the research on spatial market linkages has reflected methodological advances that have led to increasingly nonlinear time-series models. Advances in the theoretical and empirical literature over the last few decades have demonstrated that price relationships in the food chain are highly context specific. Improvements in marketing, information, and transportation technology have strengthened the links between prices in the food system, but at the same time links in the food chain are increasingly subject to vertical coordination and, thus, less visible to outside observers, including researchers.

Market structure and price controller of beef cattle in North Sulawesi

The purpose of this study is to analyze the market structure and controller of beef cattle prices in North Sulawesi. The location of the research was purposively determined, namely Manado City, Tomohon City, and Regency of Minahasa as the trade center of beef cattle in North Sulawesi. Furthermore, respondents were determined by the snowball sampling, started by obtaining information about breeders of beef cattle as business consumers and, also, the end consumers through the Department of Agriculture and Animal Husbandry in the three research areas. Through the snowball technique, 120 respondents consisted of 10 end-consumers/business consumers of beef cattle, 10 intermediate traders, and 100 breeders of beef cattle. The data, then, were analyzed using the concentration ratio model and Hirscman-Herfindahl Index to measure the market structure and asymmetric price transmission analysis to detect the controllers of beef cattle prices. The result shows that the structure of the beef cattle market in North Sulawesi led to an oligopoly with the highest concentration; while, the controllers of beef cattle prices were the end-consumer as business consumers of live beef cattle.

Analysis of Horizontal Price Transmission: The Case of Mexico–United States Dry Bean Trade

Dry bean is the leading source of plant-based proteins in Mexico, yet the country’s self-sufficiency shows an eroding tendency after the enforcement of NAFTA. During this period, the United States became Mexico’s principal supplier of dry beans. The purpose of this paper is to analyse the price transmission for black and pinto dry beans in Mexico in the period between 2012 and 2019. The research results however reveal only a very limited relationship between the analysed prices in the two countries. It is established that price dynamics are predominantly governed by domestic market interactions rather than those transmitted across the border, hence the erosion of Mexico's self-sufficiency in dry bean cannot be entirely attributed to the trade liberalization.

Vertical price transmission in wheat and flour markets in Bangladesh: an application of asymmetric threshold model

The analysis of price transmission in vertical markets is challenged by fuzzy policy environments in the case of developing countries. This paper employs threshold cointegration that takes into account the asymmetric adjustment towards a long-run equilibrium and short-run price transmission in vertical markets of wheat and flour in Bangladesh. We find evidence of threshold effects. The speed of adjustment towards the long-run equilibrium is different when the price deviations exceed the threshold value from when price deviations are below the threshold. We find evidence of short-run price asymmetries implying that downstream price responds faster when upstream price increases than when the latter falls.

Analysis of Dairy Product Price Transmission in Hungary: A Nonlinear ARDL Model

This paper addresses the assessment of the price transmission of dairy products in Hungary. Monthly prices are used in testing the hypothesis of asymmetric price transmission between farmers and retailers. The magnitude of short- and long-run asymmetric transmission between price levels is measured through a nonlinear autoregressive distributed model (NARDL). The cointegration of variables is validated through bounds test of the NARDL model. The estimated NARDL model proves the existence of long- and short-run asymmetric relationships between producer milk price and most retailer dairy product prices. Furthermore, the model confirms the presence of a significantly positive long-run price asymmetry for butter, buttercream, sour cream, and Trappista cheese. The positive long-run price transmission asymmetry results could be explained by the strong market power of milk processors, which are granted through their concentrations and the absence of competitiveness in the market. The short-run asymmetry of price transmission could be explained by implementing some policy interventions, such as the milk quotas, which limit milk production. Analyzing the asymmetric relationship between the producer milk price and the retailer dairy product prices could give a clear vision of the dairy sector and how prices move between market actors, highlighting the retailers’ purchasing power feature, and its role in determining the market price interaction.