Price Transmission Research Articles

Futures–spot price transmission in EU corn markets

AbstractPrice transmission between futures and spot prices is a relevant issue, dealing with derivatives exchange for price management practices and efficient price discovery. Indeed, due to the increased market orientation of the Common Agricultural Policy, the development of new market strategies is of utmost importance for European farmers. In this context, this study examines the degree of transmission for the corn commodity between global futures price in either the Chicago Board of Trade or Euronext and the spot prices for a selection of Member States of the European Union. This study provides critical insights into the shape of the futures–spot price transmission, confirming a long‐run relationship and a cointegrating behaviour of price sets. [EconLit Citations: Q02, Q14, E3].

Retailer heterogeneity and price transmission

AbstractDifferences in price dynamics across retail chains, even for identical products, offer the opportunity to provide new insights into the determinants of price transmission. Specifically, we highlight the role of strategic complementarity and mark‐up elasticities as the factors underpinning price transmission. Using supermarket data on a sample of orange juice and coffee products from the seven largest retail chains in the UK, the results show that ignoring strategic complementarity exerts a positive bias on the estimation of price transmission and hence overstates the importance of input costs in price setting. In contrast to recent research, private label products are found to exhibit consistently lower levels of price transmission (higher mark‐up elasticity) than national brands, likely reflecting the context of competition in UK food retailing. The focus on mark‐up elasticities points to links between the frequency of price adjustment and competition as determinants of price transmission.

ANALYZING PRICE TRANSMISSION IN THE NIGERIAN CATTLE MARKET

The study analysed price transmission in the Nigerian cattle market. Time series price data, for ten states (Borno, Cross River, Edo, Kano, Nassarawa, Osun, Oyo, Plateau, Yobe and Zamfara) for the years, 2002-2017 were used for the analysis. The summarised result on Threshold Vector Error Correction model showed that positive and negative deviations for eight states (Borno, Cross River, Edo, Nassarawa, Osun, Plateau, Yobe and Zamfara) exceeded their respective threshold values. Also all the values of the above threshold values are not equal to the below threshold values,indicating the presence of asymmetric transmission. The presence of asymmetric transmission showed price changes along the chain (from farmer/marketer to consumer) was greater than the market costs of handling cattle and agents will be in a greater position to implement price changes before transmission takes place. This indicates strong asymmetric price transmission since price changes moved from bottom of the chain to the top. There is need to improve on the market information system in the country so that information will flow to all the markets.

Analysis on the Transmission of International Oil Price to China’s Price Index--Based on Granger Causality Network

This paper uses complex network theory and Granger causality method to construct Granger Causality Network among price indices (PIGCN), specifically based on crude oil price and China’s domestic price index from a systematic perspective and provides a statistical physical method to analyze conduction fluctuations. This paper selects four typical price indices in China, including 36 sub price indices as samples for empirical research. Through the analysis of the PIGCN structure, we have analyzed the volatility transmission path of the international crude oil price and Chinese domestic price index, and further revealed the dynamic relationship among the price indices. Also, we have put forward some policy recommendations to better monitor the spread of price fluctuation risks.

Asymmetric price transmission: Evidence from pulse markets of India

Asymmetric price transmission: Evidence from pulse markets of India

쌀 가격의 유통단계별 인과성과 비대칭적 가격 전이 검정

This study empirically analyzes the asymmetric price transfer of rice under the assumption that the degree of price response in the production stage could be reduced or expanded without being constantly transferred to the wholesale or retail stage due to costs and processing occurring in the distribution process. we first analysis the causality of the wholesale price and retail price of rice, and determine the time lag in which the price of rice is transferred from the wholesale market to the retail market. In addition, we analyze asymmetric price transmission to determine whether the rice distribution market is inefficient. In the result, the time lag is estimated to be about 10 to 30 days. Furthermore, the analysis result shows that there is positive asymmetric price transmission in the wholesale-retail market. This result can be interpreted as a high probability of a retailer''s excess profit, meaning that changes in retail prices are more sensitive when wholesale prices increase than when the wholesale prices decreases. These results suggest that improvement of the rice distribution system needs to be approached not only at the production-wholesale stage but also at the retail-wholesale stage. In other words, if an efficient retail price is determined through strengthening monitoring system of retail prices, we can expect that the more efficient distribution structure in rice market.

Testing for price transmission in Thailand’s oil palm and palm oil markets: an empirical study using time series analysis

This study aims to analyze the price transmission within the supply chains of Thailand’s oil palm and palm oil markets. The study employs time-series data from January 2012 to December 2019, which comprises 96 monthly price samples, using econometric analysis, namely, the ADF unit root, Granger causality, co-integration, and error correction model. The empirical results show that (1) there are four causal relationships from crude palm oil price running to palm fruit price, the wholesale price of bottle-refined palm oil, and the retail price of bottle-refined palm oil, and from the wholesale price of bottle refined palm oil running to the wholesale price of gallon refined palm oil. The results further reveal that (2) the palm fruit price has the highest price transmission efficiency, followed by the wholesale price of bottle-refined palm oil, the retail price of bottle-refined palm oil and the wholesale price of gallon refined palm oil. The findings conclude that the crude palm oil price influences the pricing in Thailand’s oil palm and palm oil markets.

Spatial Integration of Vegetable Markets of Sri Lanka during COVID-19 Pandemic

The majority of the vegetables moving through traditional supply chains pass via Dambulla Dedicated Economic Centre (DDEC), which is the main wholesale market in Sri Lanka, to the regional markets. With the COVID-19 pandemic, the Sri Lankan government implemented several measures to keep vegetable markets of the country integrated. The objective of this study was to examine the degree of market integration of nine regional wholesale vegetable markets with DDEC in Sri Lanka during the COVID-19 pandemic. Pairwise comparisons between vegetable prices at DDEC and regional markets were done using Engle- Granger Co-integration test to achieve this objective. The analysis was carried out in the first differenced form, which conformed to the Augmented Dickey-Fuller (ADF) tests of stationarity. Short-run price disequilibrium was tested using Vector Auto-Regression Model (VAR) and Vector Error Correction Model (VECM). Weekly wholesale prices of beans, carrot, tomato, and brinjal markets during 2018-2021 were used for the analysis. The results revealed that only bean markets in Dehiaththakandiya, Thambuttegama, Nuwara Eliya, Meegoda, and Colombo wholesale vegetable markets depicted cointegrated behaviour with DDEC during the COVID-19 period. None of the other vegetable markets were integrated spatially with DDEC during the COVID-19 period. Before the pandemic, except in Ampara, Colombo and Dehiaththakandiya regional markets, all the other regional markets for beans, carrot, tomato, and brinjal were spatially integrated with DDEC either long run or short run. In conclusion, despite various government interventions to keep the vegetable market channels smoothly and consistently, the COVID-19 has negatively affected on price transmission of the vegetable marketing system of the country.

Monetary Policy Transmission Paths and Money Supply in Sub-Saharan Africa: Evidence from Nigeria and Ghana

The main objective of this study gears towards evaluating monetary policy transmission paths and money supply in Sub- Saharan Africa: evidence from Nigeria and Ghana from1981- 2018. The Central Bank of Nigeria, Bank of Ghana and World Bank, World Development Indicator of 2018 furnished us with the data used for analysis. This study explored three different monetary policy transmission channels: interest rate, credit and asset pricing transmission channels and these variables were regressed on money supply in both countries using Auto Regressive Distributed Lag (ARDL) Model estimation technique. The study also employed other diagnostic tests such as: Normality, Auto correlation test, Heteroskedasticity test and Breusch-Godfrey Serial Correlation LM test and they confirmed the validity and reliability of the model employed. The inferential results revealed that credit to private sector transmission channels in both Nigeria and Ghana had positive and significant impact on money supply but lending rate transmission paths in the two countries impacted insignificantly on money supply. This study concludes that monetary policy transmission channels in Nigeria were more robust in impacting on money supply than in Ghana. As such, the study recommends that monetary authorities of both countries need to formulate stringent monetary policies that will reduce the circulation of money outside the financial systems and there should be a synergy between monetary and fiscal policies in both economies so as to aid the instruments of macroeconomic policies achieve their objectives.

Price transmission between oil and gasoline and diesel: A new measure for evaluating time asymmetries

One of the most widely debated issues concerning asymmetric price transmission between oil and fuel prices is what is known as the “rockets and feathers” phenomenon. Although theoretical debate on the short-term connection between oil prices and petroleum product prices takes into account the speed and the magnitude of response, a literature review shows that empirical applications have centred their attention on the latter. This article contributes to the discussion introducing a new measure to quantify mean lag responses to positive and negative oil price shocks from asymmetric dynamic multipliers from a non-linear autoregressive distributed lag (NARDL) model that analyses weekly data from 2009 to 2020 for 12 OECD countries. The results show that both asymmetries, in terms of speed and magnitude, exist for many of the analysed markets, demonstrating the importance of not only accounting for the impact but also for the mean lag of the response.

Price transmission between international and domestic prices in the Brazilian citrus sector

The orange juice chain is a representative sector of the Brazilian agribusiness sector and its performance warrants analysis to identify strategies to enhance its competitiveness. Analysis of asymmetry in food value chain is important because it provides valuable information on market structure and performance. We use an asymmetric threshold error correction model to examine threshold, short- and long-run asymmetries on price transmission from international to domestic prices of oranges in Brazil. We use monthly data on international frozen concentrated orange juice prices and domestic prices of oranges in Brazil for the period from January 1996 to December 2020 in the analysis. We find evidence of threshold and asymmetries in short- and long-run price transmission and asymmetric adjustment towards a long-run relationship between international and domestic orange prices in Brazil. Decreases in international prices that lead to reductions in marketing margins are passed on quickly to domestic prices, but this is not the case for increases in international prices. We discuss implications for the Brazilian citrus industry.

The role of fuel prices in spatial price transmission between horticultural markets: empirical analysis from a developing country

This article aims to analyze how fuel prices impact spatial price transmission between two Chilean horticultural wholesale markets. We implement a regime-dependent VECM where price transmission parameters depend on dynamics imposed by a stationary exogenous variable (fuel price). We identified two price transmission regimes characterized by different equilibrium relationships and short-run adjustment processes. This implies that fuel prices affect price transmission elasticities and intermarket adjustment speeds. Our results show increasing marketing costs as farm to market distance grows. This impact depends on each product’s attributes. Highlights This article analyzes the effect of fuel prices on the price transmission mechanism between the most relevant Chilean horticultural wholesale markets. A regime-dependent Vector Error Correction Model where price transmission parameters depend on fuel price was implemented. Clear evidence of the role played by fuel prices for in horizontal price transmission between the wholesale markets considered in this study was found. This situation supports the idea that regardless of quantities traded in regional markets, the major effect of price adjustment is a result of the high demand, distances and market concentration of a central market. This impact depends on each product’s attributes.

Agricultural Growth Diagnostics: Identifying the Binding Constraints and Policy Remedies for Bihar, India

Agriculture plays a significant role in economic development of underdeveloped regions. Multiple factors influence the performance of agricultural sector but a few of these have a strong bearing on its growth. This study develops a growth diagnostics framework for agricultural sector in Bihar, located in eastern India, to identify the most binding constraints. The study results show that poor functioning of agricultural markets and low-level of crop diversification are the important reasons for low agricultural growth in Bihar. Rise in price instability of agricultural produces indicates a weak price transmission across the markets even after repealing the Agricultural Produce Market Committee Act. Poor market linkages and non-functioning producer collectives at village-level affect the farmers’ motivation for undertaking crop diversification. Hence, policy suggestions to overcome these binding constraints include the state provisioning of basic market infrastructure to attract private investment in agricultural marketing, strengthening the Farmer Producer Organisations, and framing a comprehensive policy on crop diversification.

Imperfect tacit collusion and asymmetric price transmission

We investigate asymmetric price transmission (APT) in laboratory experiments and find that imperfect tacit collusion is likely the cause in our otherwise frictionless markets. We vary the number of sellers across markets to evaluate the role competition plays in APT. We report similar magnitudes of asymmetry in markets with 3, 4, 6, and 10 sellers, but not in duopolies. Furthermore, sellers consistently set their prices above the best-response levels implied by their forecasts, particularly in periods following negative shocks. We interpret these pricing deviations as sellers’ intentions to collude, and note that they mechanically drive the pricing asymmetries we observe.

Conditional tail price risk spillovers in coffee markets across quality, physical space, and time: Empirical analysis with penalized quantile regressions

Transmission of price shocks among related markets is a necessary condition for economic efficiency. Earlier empirical studies have investigated price spillovers in green coffee markets across physical space, quality space, and/or time through highly restrictive models. The present work examines price transmission “at the extremes” using penalized quantile regressions, an econometric tool that allows one to analyze complex market networks. The analysis relies on daily green coffee prices from two geographically separated markets (USA and EU), four coffee varieties, and two futures markets. The empirical results suggest: (a) price risk spillovers are stronger when quality differentiation is low and when green coffee varieties are traded within the same spatial market; (b) higher quality varieties are net-transmitters of price risk to lower quality ones while futures markets are net-receivers of price risk from spot markets; and (c) asymmetric price spillovers are more likely to occur for coffee beans traded in different spatial markets.

Technical Analysis of Tourism Price Process in the Eurozone

This study is a specific contribution to investigating normalities in prices to a well-established cointegrated vector autoregressive model (VAR). While the role of prices in computational economics has been investigated, the real prices vis-à-vis nominal prices in the decision process has been neglected. The paper investigates the transition from nominal to real time-series of prices without losing information in the data set when deflating or de-seasonalizing. The likelihood approach is based on careful specifications of the (co)integration characteristics of tourism prices. The results confirm that the transmission of tourism prices in the Eurozone positively impacts Slovenian tourism prices when the spatial consolidated cointegrated VAR model is used. The theoretical-conceptual and empirical contribution is twofold: first, the study develops and empirically applies bona fide divisor of normality consolidation for time-series in levels instead of routinely utilised inflation integers, and second, the study introduces perfection of prices on a long-run time-series treatment.

Price transmission in biofuel-related global agricultural networks

This article investigates the connections among the prices of biofuels, agricultural commodities and other relevant assets in Europe, the US, and Brazil. The analysis includes a comprehensive data set covering price data for 38 traded titles during the period from 2003 to 2020. We used the minimum spanning tree (MST) approach to identify price connections in a complex trading system. Our analysis of mutual price connections reveals the major defining features of world-leading biofuel markets. We provide the characteristics of the main bioethanol and biodiesel markets with respect to government policies and technical and local features of the production and consumption of particular biofuels. Despite a relatively long and dynamically evolving history of biofuels, the biofuel systems in the US, Brazil and Europe do not converge toward the same pattern of relations among fossil fuels, biofuels, agricultural commodities and financial assets.

Nonlinear price transmission in the rice market in Senegal: a model-based recursive partitioning approach

ABSTRACT This paper analyzes the nonlinear effects in price transmission from international markets to the local rice market of Dakar (Senegal) focusing on asymmetries through threshold effects. We use recent machine learning methods (model-based recursive partitioning trees) to detect asymmetries in the price transmission mechanism. Using a model based recursive partitioning algorithm, we identify a threshold and confirm the asymmetry in the price transmission. Local retail prices are more sensitive to world price increases than to declines. Only 11.80% of positive deviations (international prices go down) are eliminated at the end of the subsequent month, while 39.50% of negative deviations (world prices go up) are eliminated after one month. These results highlight the role of transaction costs and the market power of commercial intermediaries in price transmission in the sense that margins are corrected more rapidly when they are squeezed relative to their long run level than when they are stretched. Our results are confirmed by the traditional Threshold Autoregressive (TAR) model.

Price transmission and cost pass-through on the German dairy value chain

Price transmission and cost pass-through on the German dairy value chain

Price transmission in European fish markets

ABSTRACT We investigate price transmission in European fisheries markets. To start, we identify clusters of fish species both cross-regionally and within countries. A major issue in the clustering exercise is missing data due to reporting issues and seasonality in landed fish catches. To handle this we implement k-POD clustering which unlike traditional k-means clustering is able to account for missing data in clustering. Next, we move on to our primary goal of investigating price transmission through modelling price volatility spillovers. A missing value VAR framework is applied to identify directional spillovers among fish prices within clusters. We show that the directional volatility spillover effect is more prominent within each country for different species clusters than that for species cross-regionally. This suggests price transmission within localized markets for fish, rather than cross-regional markets for individual species. Although there are some neighbour country effects and some species that appear to be priced cross-regionally. Our study is the first to explore these multiple fish pricing dynamics, particularly taking account of the important issue of missing data which is a notable feature of fish pricing data.