PRICE ASYMMETRY IN INTERNATIONAL- INDONESIAN MARKETS OF SKIMMED MILK POWDER

Abstract

This study examines the price transmission of skimmed milk powder (SMP) from exporting countries (United States of Australia, Belgium, and New Zealand) to the Indonesian market by using the Error Correction Model (ECM) method. Monthly SMP prices in the exporting countries and Indonesia from 2010 to 2019 were utilized in the analysis. The results showed that transmission between exporting countries and Indonesia's SMP prices were asymmetric in the short run in which domestic market price responds faster when exporter market prices increase than when the latter fall. This implies inefficiencies in the import process due to the presence of transaction costs. Meanwhile, there was no asymmetric price transmission identified in the long run.

Keywords

• asymmetrical prices
• ecm
• skimmed milk powder prices