Asymmetric Price Transmission Research Articles

Asymmetric price transmission in perishable crops value chain: A NARDL approach

Asymmetric price transmission in perishable crops value chain: A NARDL approach

Investigating Asymmetric Price Transmission and Monopoly in Iran’s Red Meat Import Market

Investigating Asymmetric Price Transmission and Monopoly in Iran’s Red Meat Import Market

Market integration and asymmetric price transmission in selected domestic markets for major staple foods in Uganda

In this study, we examined the price transmission dynamics and market integration among domestic markets for Uganda’s major staple foods (matoke, maize, and beans) utilizing the Granger causality analysis, bounds test, Wald test for long- and short-run asymmetry, and the nonlinear ARDL model. Among the key findings, the causal order between wholesale and retail commodity prices flows unidirectionally forward from the wholesale to the retail level across all markets. Wholesale and retail prices for Uganda’s staple foods are interlinked in all markets, and spatially separated markets are also well integrated. The Wald test revealed asymmetric price transmission (APT) in speed alone for the pairs wholesale and retail prices of matoke in Kampala, and wholesale prices of matoke in Mbarara with Kampala retail prices, both APT in magnitude and APT in speed for the pairs wholesale and retail prices of beans in Kampala, wholesale and retail prices of maize in Masindi, and wholesale prices of beans in Masindi with wholesale and retail prices in Kampala. We also found that in the long run, retail prices respond more strongly to wholesale price increases than decreases, an implication of positive APT in the marketing supply chain of Uganda’s major staples. This may be linked to information asymmetry between traders and consumers, traders’ adjustment costs, production levels, inventory management, and the market power of retailers. We thus concluded that final consumers are more likely to experience an increase rather than a decrease in the prices of staples at the retail level, while retailers are more likely to benefit from price decreases at the wholesale level.

Analysis on Asymmetric Price Transmission between Wholesale Price and Retail Prices of Seasoning Vegetables

Analysis on Asymmetric Price Transmission between Wholesale Price and Retail Prices of Seasoning Vegetables

Asymmetric Price Transmission of Some Basic Commodities in Indonesia

The prices of these international goods, world oil prices, exchange rates, and government policies, always influence developments in the current global era that drive domestic commodity prices. This study aims to analyze the effect of asymmetric price transmission on several Indonesian domestic commodities. Asymmetric price transmission occurs if the speed of price adjustment above or below the price trend is not the same. Positive or negative price changes occur if the price is above or below the price trend. Under dynamic conditions, each price will adjust to the long-term price level. This study applies the error correction model (ECM) method to capture the speed of adjustment of each commodity following the long-term price level. This study involves asymmetric price transmission to see price adjustments. Econometric testing through the error correction model is used to determine how much the domestic price adjustments are when there is an increase or decrease in international prices for essential commodities. The results showed an adjustment in domestic prices when global prices increased or decreased for wheat flour, granulated sugar, soybeans, beef, and broiler meat. Based on the coefficient and significance level, there was no domestic price adjustment for rice and broiler chicken eggs. Policy implications include providing input for policymakers in determining prices so that market prices are stable and in line with people's purchasing power.

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.

A tripartite evolutionary game model of ginger transaction under the “regulation + target price insurance ” policy

AbstractThis paper constructs a tripartite evolutionary game model of government, dealers, and ginger farmers under asymmetric price transmission and explores the impact of the target price insurance on the stabilization strategy of the tripartite evolutionary game. It is also demonstrated that farmers’ interests can be effectively protected under long‐term government regulation and issuance of reasonable insurance subsidy coefficients. Finally, the model is assigned according to the actual data to systematically reveal the factors affecting the decision of each actor. The research shows that: long‐term government regulation is necessary to effectively curb speculation, while the implementation of target price insurance can improve farmers’ trading position; the probability of government regulation and implementation is not only related to the cost and social benefits but also influenced by ginger trading volume, while the probability of ginger dealers choosing to hoard speculation increases with the increase of ginger trading volume.

Asymmetric price transmission and impulse responses from U.S. crude oil to jet fuel and diesel markets

Despite numerous studies on price interdependencies in petroleum markets, the exploration of price transmission from crude oil to jet fuel and diesel remains surprisingly limited. This knowledge gap is particularly remarkable given the increasing economic significance of these fuels and the emerging biojet and biodiesel industries. Filling this research gap, this study employs a nonlinear time series approach that considers unique features of these markets— ‘stickiness’ of firms' responses, asymmetric price adjustments, and the time-dependent responses to oil price shocks. This approach provides a much-needed understanding of long-term price relationships, short-term dynamic adjustments, and price response mechanisms to crude oil shocks in the context of jet fuel and diesel markets. Key results include: (1) both jet fuel and diesel have long-run equilibrium relationships with oil prices; (2) price adjustments of jet fuel and diesel are asymmetric, in opposite directions, due to distinct differences in industrial characteristics; (3) the responses of the two types of fuel prices to oil shocks show nonlinear dynamic paths, with different amplitudes and decay periods. The findings contribute to a better understanding of the current fuel industries, and provide insights into emerging biofuel markets, with implications for businesses and policymakers.

Asymmetric Price Transmission between Crude Oil and the US Gasoline Market

Gasoline and crude oil price movements have been the focus of many studies in the last decade. We use the asymmetric error correction model (ERM) to examine the hypothesis of asymmetric pricing for both regular and premium gasoline markets at the US national level and in the four states with the highest gasoline consumption. Using weekly crude oil and retail gasoline prices from June 2000 to February 2023, the results show an asymmetric response in the gasoline market for all four states and at the national level. However, the adjustment speed tends to differ for the types of gasoline and across states. The implications of these results for policy and welfare are discussed in this study.

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

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.

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.

Does vertical asymmetric price transmission exist in the rice markets?

Purpose. This study aims to empirically measure and analyze the long-run relationship and asymmetric price transmission of the rice market in Aceh Province, Indonesia. It also attempts to empirically examine and analyze the existence of the vertical price trends along the rice distribution channels both in the short term and long term.
 Methodology / approach. Monthly data from January 2009 to December 2019 on the prices of dry harvested rice (known as Milled Dry Grain – MDG in Indonesia) at the farm level, the prices of MDG at the rice mill level, and the retail prices of the medium- and premium-quality rice were gathered from the report of Statistics Indonesian Agency (BPS – Statistics Indonesia). The study uses a series of econometric techniques comprising cointegration, causality, and Error Correction Model (ECM) to investigate the research objectives. 
 Results. The study found price integration between the upstream and downstream rice markets. The asymmetric price transmission existed in the short run along the rice distribution chain, including the prices of medium-quality rice and premium-quality rice. In the long term, the price of MDG at the huller level is transmitted asymmetrically to the premium-quality rice at the consumer level. A positive asymmetric price transmission is found along the rice supply chain, indicating an increase in price in the upstream market has transmitted faster to the downstream markets than the price decreases.
 Originality / scientific novelty. Unlike previous studies that analyzed only price integration in the rice market and the direction of price transmission separately, this study empirically investigates both price integration, price transmission, and the direction and magnitude of asymmetric price transmission in the Indonesian rice market. Specifically, this study explores the existence of price integration from upstream to downstream markets and the existence of asymmetric price transmission as well as measures the magnitude and direction of asymmetric price transmission in the rice market in Indonesia. The findings of the study enrich the existing literature and contribute insights into enhancing rice price policy from the perspective of Indonesia, the fourth largest populous country in the world. 
 Practical value / implications. These findings show the importance for the local government to maintain symmetrical market conditions to ensure efficient rice markets in the long term. Rice traders that control the premium-quality rice market by reprocessing medium-quality rice into premium-quality rice should be closely monitored. An inefficient rice market has caused consumers to spend a large proportion of their income on rice, leaving only a little to afford other needs.

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.

Price Change and Market Resilience under COVID-19 Pandemic

The COVID-19 pandemic resulted in the establishment of several restrictions in Japan that caused an external shock to the food supply chain. This study investigates onion price changes resulting from the shock in the Tokyo wholesale/retail market by using anomaly analysis, asymmetric price transmission, and event study. It was found that the wholesale onion price experienced a significant fall between April 2020 and May 2020 and recovered after the state of emergency. Moreover, the asymmetric price transmission from wholesale to retail markets was found before and during COVID-19, implying that the wholesale-retail relationship is resilient to the shock.

Increasing the productivity of shallot planting and its impact on the agricultural market, West Java.

The main objective of this study is to increase the productivity of shallot planting and its impact on the agricultural market. This study analyzes the transmission of shallot prices at the Caringin Main Market (wholesale) level with shallot prices at the farmer (producer) level using quantitative analysis of the Asymmetric Error Correction Model (AECM). The results showed that long-term transmission with positive ECT coefficients and negative ECT showed the same and significant positive values. Positive ECT is 0.286909 and negative ECT is 0.289266, where when there is a price deviation above and below the average balance line of onion prices at the farmer level, it takes three weeks to adjust to the balance of changes in shallot prices. The onion market at the wholesale or parent market occurs asymmetric price transmission from the wholesale price level (Caringin Main Market) to production prices (at the farmer level). A significant t-value of one percent evidences this. Asymmetric price transmission can be caused by abuse of market power.

Asymmetric Price Transmission and Market Power: A Case of the Aquaculture Product Market in China

In the aquaculture product market, the efficiency of vertical price transmission is an important manifestation, representing the marketization level of aquatic products. When the price of any sector in the aquatic product industry chain fluctuates slightly, the welfare of each sector will be affected accordingly. This study focuses on carp, the main freshwater fish in China, to explore the relationship between asymmetric price transmission and market power. We use the nonlinear autoregressive distributed lag model to simultaneously describe the short- and long-term asymmetric effects of wholesale-to-retail prices for carp, and apply the asymmetric autoregressive conditional heteroskedasticity model to analyze the differences in market power between wholesalers and retailers. The results confirm the evidence of a nonlinear cointegration between wholesale and retail prices in the carp market. There are also significant asymmetric effects in both the short- and long-term transmission speed and degree of price transmission from the wholesale to the retail market. It is evident that carp wholesalers have strong control over the price, resulting in an asymmetric effect in vertical price transmission, indicating a need to improve the development level and integration degree in the Chinese aquatic products market. Subsequently, the government should develop effective systems for aquatic product circulation, strengthen supervision over the aquatic product wholesale market, and establish a public aquatic product price platform to promote the healthy and stable development of China’s aquatic product market.

Transmisión vertical y espacial de precios en el mercado mexicano e internacional de ganado vacuno

From 2000 to 2019, the Mexican beef subsector has undergone significant structural changes; the most important was the concentration of both production and marketing stages. In 2019, the Mexican Federal Commission of Competence revealed that, Mexican households’ income diminished between 16 and 31 % due to a lack of market efficiency. In the case of meat, the reduction may be up to 98 %. In this context, the objective of this study was to examine the degree of spatial price transmission between national and international live cattle prices and the vertical transmission between live cattle prices and carcass meat prices to evaluate market efficiency. The econometric approach consists of the estimation of a vector error correction model, using monthly beef real prices, for the period 1990-2019. Findings from this research provide information for decision-makers and stakeholders in this industry: these comprehend unidirectional transmission of international beef prices to domestic beef prices and from farm price to processor price. Also point to the existence of asymmetric price transmission, which is related to whether cattle and beef prices are increasing or decreasing. Results indicate that a long-run single cointegration relationship exists between international and farmer prices, and between processor and farm price. The direction of price transmission tends to go from producers to processors and from international price to farmer price. When the international price increases, the speed of adjustment tends to be significantly slower, in contrast to when the international price decreases, resulting in a significantly faster rate of adjustment.

Market integration and price transmission in Indian shrimp exports

Time series weekly pricesof Indian shrimp during the period 2007–08 to 2016–17 were analyzed to understand price transmission in trade. Johansen's tests revealed cointegration between export and import prices of frozen shrimp to the American and Japanese markets from India.Joint F-testshowedasymmetric price transmission for only export price of Penaeus monodon (larger size)to import price of P. monodon (larger size), while import prices of P. monodon (smaller size),P. vannamei (larger size)and P. vannamei (smaller size)to Japan were found to be symmetric. Price transmission to USA were found to symmetric except for export price of P. monodon (LS)to import price of P. monodon (LS), while import price of P. monodon (SS), P. vannameiof larger and smaller sizes were found to be asymmetric.Increase in export prices led to rapid decline in imports while decline in export prices resulted inrelativelyslower increase in imports. Price adjustment to equilibrium was faster in USA than Japanese market. The study found that Indian frozen shrimp prices were well integrated among the countries viz. India, USA and Japan. But reasons for asymmetric price transmission in India's shrimp export markets may be attributed to lack of uniformity in supply, weak infrastructure, price information gaps, the operation of numerous traders in the existing marketing system. Structural imbalances in trade arising from foreign trade policy, international financial markets and supply chain inefficiencies need to be ironed out.

Asymmetry in Gasoline Price Transmission: How do Fuel Pricing Strategy and the Ethanol Addition Mandate Affect Consumers?

This work aims at verifying the existence of asymmetries in gasoline price transmission between refining, distribution, and gas stations. The analysis covers two moments: before (2006-2016) and after (2016-2020) the new fuel pricing strategy adopted in the refining sector. Before 2016, gasoline prices in refineries were stable due to price intervention. After that, prices fluctuated in convergence with the international market. In this paper, we also consider ethanol prices. Due to an addition mandate, ethanol prices influence gasoline price' dynamics. Our hypothesis is that there are “rocket” and “feather” patterns. This means that positive changes in costs are rapidly and fully transmitted to prices, while negative cost changes tend to be transmitted gradually. As a consequence, there is a cost for consumers. We use Dynamic Ordinary Least Squares estimators and Error Correction Models to test the presence of asymmetries and Cumulative Response Functions to measure consumer cost. Results confirm an asymmetric price transmission and indicate that the new pricing strategy has changed the readjustment dynamic. Although we detect asymmetries in both periods, the new pricing strategy proved to be better for consumers, as social costs decreased after its adoption.