Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Assessing symmetric price transmission by using threshold cointegration in Iranian egg market

Assessing symmetric price transmission by using threshold cointegration in Iranian egg market Eggs bear an essential role in Iranian diet, primarily for their protein content. The egg production strictly depends on the price of inputs, that is corn used for poultry feeding. The upsurge in corn prices in recent years gave rise to both consumers’ and producers’ dissatisfaction, increasing production cost and the egg price in the final market. The purpose of this paper is to investigate the price-transmission dynamics between corn and retail egg prices in Iran.Design/methodology/approachIndividual commodity price series generally contain stochastic trends and they are non-stationary. Standard unit root and cointegration tests will be conducted in order to determine whether price series are stationary and whether they are cointegrated, respectively. The existence of cointegration between the two-price series depends on the nature of autoregressive process. If there is an asymmetric convergence between two variables, then Engle and Granger’s (1987) test can have a misspecification error and the result cannot indicate nature of variables. Threshold or asymmetric convergence test should be used, which can detect the asymmetric behavior of variables and threshold effects on series.FindingsResults showed that, in the long run, owing to price transmission, any price shocks on corn price will be transmitted to the egg price.Practical implicationsPolicy makers should implement input and output price policies to support producer and consumer in the retail market to increase consumer and producer welfare, and they should also control intermediaries in this market.Originality/valueThis research dealing with price transmission has been concerned only with applying time-series modeling techniques to price data. The main focus of this approach has been to characterize vertical price relationships by the extent, speed and nature of the adjustments through the supply chain to market shocks generated at different levels in the marketing process. Thus, it complements the marketing margin models, which are mainly concerned with testing for market imperfections and calculating the price transmission. Besides these points, particular importance has been given in this research to the question of symmetry of price adjustments. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png British Food Journal Emerald Publishing

Assessing symmetric price transmission by using threshold cointegration in Iranian egg market

Download PDF
11 pages

Loading next page...
 
/lp/emerald-publishing/assessing-symmetric-price-transmission-by-using-threshold-nGLu6PdKHv
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0007-070X
DOI
10.1108/bfj-11-2018-0745
Publisher site
See Article on Publisher Site

Abstract

Eggs bear an essential role in Iranian diet, primarily for their protein content. The egg production strictly depends on the price of inputs, that is corn used for poultry feeding. The upsurge in corn prices in recent years gave rise to both consumers’ and producers’ dissatisfaction, increasing production cost and the egg price in the final market. The purpose of this paper is to investigate the price-transmission dynamics between corn and retail egg prices in Iran.Design/methodology/approachIndividual commodity price series generally contain stochastic trends and they are non-stationary. Standard unit root and cointegration tests will be conducted in order to determine whether price series are stationary and whether they are cointegrated, respectively. The existence of cointegration between the two-price series depends on the nature of autoregressive process. If there is an asymmetric convergence between two variables, then Engle and Granger’s (1987) test can have a misspecification error and the result cannot indicate nature of variables. Threshold or asymmetric convergence test should be used, which can detect the asymmetric behavior of variables and threshold effects on series.FindingsResults showed that, in the long run, owing to price transmission, any price shocks on corn price will be transmitted to the egg price.Practical implicationsPolicy makers should implement input and output price policies to support producer and consumer in the retail market to increase consumer and producer welfare, and they should also control intermediaries in this market.Originality/valueThis research dealing with price transmission has been concerned only with applying time-series modeling techniques to price data. The main focus of this approach has been to characterize vertical price relationships by the extent, speed and nature of the adjustments through the supply chain to market shocks generated at different levels in the marketing process. Thus, it complements the marketing margin models, which are mainly concerned with testing for market imperfections and calculating the price transmission. Besides these points, particular importance has been given in this research to the question of symmetry of price adjustments.

Journal

British Food Journal – Emerald Publishing

Published: Jun 28, 2021

Keywords: Iran; Symmetry; Poultry; Price transmission; Threshold autoregressive (TAR) model

References

  • Asymmetric price transmission in the Spanish lamb sector
    Ben Kaabia, M.; Gil, J.M.
  • Incomplete transmission of coffee bean prices: evidence from the Dutch coffee market
    Bettendorf, L.; Verboven, F.
  • Price asymmetry in the US pork marketing channel
    Boyd, M.S.; Brorsen, B.W.
  • Gasoline and crude oil prices: why the asymmetry?
    Brown, S.P.A.; Yücel, M.K.
  • Price dynamics in a vertical sector: the case of butter
    Chavas, J.P.; Mehta, A.
  • Distribution of the estimators for autoregressive time series with a unit root
    Dickey, D.A.; Fuller, W.A.
  • Vertical price dependence structures: copula based evidence from beef supply Chain in the US
    Emmanouilides, C.; Fousekis, P.
  • Unit root tests and asymmetric adjustment with an example using the term structure of interest rates
    Enders, W.; Granger, C.W.J.
  • Co integration and threshold adjustment
    Enders, W.; Siklos, P.
  • Co-integration and error correction: representation, estimation and testing
    Engle, R.F.; Granger, C.W.J.
  • Spatial and vertical price transmission in meat markets
    Goodwin, B.K.
  • Price transmission and asymmetric adjustment in the US beef sector
    Goodwin, B.K.; Holt, M.T.
  • Asymmetry in beef, lamb and pork farm-retail price transmission in Australia
    Griffith, G.R.; Piggott, N.E.
  • Price transmission asymmetry in pork and beef markets
    Hahn, W.F.
  • An approach to specifying and estimating nonreversible functions
    Houck, P.J.
  • Statistical analysis of cointegration vectors
    Johansen, S.
  • Maximum likelihood estimation and inference on cointegration – with applications to the demand for money
    Johansen, S.; Juselius, K.
  • Notes on farm-retail price transmission and marketing margin behavior
    Kinnucan, H.W.; Zhang, D.
  • Investigation of the determinants of farm-retail price spreads
  • Asymmetry in price transmission in agricultural markets
    McLaren, A.
  • Asymmetric price transmission: a survey
    Meyer, J.; Von Cramon-Taubadel, S.
  • Time series econometrics and commodity price analysis: a review
    Myers, R.J.
  • Vertical price relationships between different cuts and quality grades in the US beef marketing channel: a wholesale-retail analysis
    Panagiotou, D.; Stavrakoudis, A.
  • Prices rise faster than they fall
    Peltzman, S.
  • Further evidence on breaking trend functions in macroeconomics variables
    Perron, P.
  • Market or no market
    Ranani, M
  • Asymmetries in price and quantity adjustments by the competitive firm
    Reagan, P.B.; Witzman, M.L.
  • On perishability and vertical price transmission: empirical evidences from Italy
    Santeramo, F.G.; von Cramon-Taubadel, S.
  • Price transmission and asymmetric adjustment in the Spanish dairy sector
    Serra, T.; Goodwin, B.K.
  • Analysis of price transmission along the food chain
    Varra, P.; Goodwin, B.K.
  • Estimating asymmetric price transmission with the error correction representation: an application to the German pork market
    Von Cramon-Taubadel, S.
  • A measure of marketing price transmission in the rice market of Taiwan
    Wang, K.M.; Lee, Y.M.