Asymmetric price transmission analysis in the Czech pork market

Abstract

The paper examines the characteristics of farm, processor and consumers (retail) price relationship within the Czech pork market. Last years the farm prices of pork meat are volatile comparing to processors and consumers prices. In these conditions the analysis of the character of price transmission becomes an actual issue. The paper employs the pre-cointegration, cointegration approach and the coefficients of price transmission elasticity for testing asymmetry in the transmission of farm pork price changes to changes in the processor and retail price. In this analysis monthly farm, processor and retail prices of pork and pork products encompassing the January 2006 to September 2017 were used. Empirical results of applicated approaches suggest that in the short-run, the processor’s and consumer’s price responds differently to the increase and decrease of farm price and processor’s price, accordingly. Moreover, the evidence of different speed of price long-run adjustment was proved. The results proved the existence of price transmission asymmetry, and besides, this fact is pronounced more significant in the second stage of agri-food chain, i.e. in the processor-retailer relationship.

Keywords

• error correction model
• pork products
• price asymmetry
• price transmission elasticity