Analysis the price transmission on saffron market case study: Razavi, North and South Khorasan Provinces

Abstract

Asymmetric price transmission is instances of market imperfection which can affect consumers’ welfare. Because of this matter, analyzing price transmission in agricultural market is an important issue. Saffron is a strategic agricultural commodity in Iran, which mostly produces in Razavi, North and South Khorasan provinces. In this study saffron’s price behavior in these provinces has been investigated. First Johanson Co-integration and Engel-Granger test have been used to investigate long-run relation between monthly saffron’s prices from 2006- 2011. Then, threshold Co-integration test has been used to examine whether price transmission is symmetric or asymmetric. Plus, Threshold Vector Error Correction model has been used to analysis short-run adjustment in saffron market in these provinces. Main results showed that saffron price transmission in Razavi, north and south khorasan is symmetric. The results show that the market price support policies can be helpful in the three provinces of saffron.

Keywords

• Price transmission
• Saffron
• The error correction model
• Threshold Co-integration