Vertical price transmission and non-linear price adjustments in the beef market of East Azarbaijan province

Document Type : Research Paper

Authors

1 Assistant Professor, Department of Agricultural Economics, Faculty of Agriculture, University of Tabriz, Tabriz, Iran

2 MSc., Department of Agricultural Economics, Faculty of Agriculture, University of Tabriz, Tabriz, Iran

3 Associate Professor, Department of Agricultural Economics, Faculty of Agriculture, University of Tabriz, Tabriz, Iran

Abstract

This study considers the price transmission mechanism between farm and retail levels of beef market in East Azerbaijan with weekly prices over 1377:1 to 1390:52 periods. To this end, using advantages of multivariate models, Hansen- Seo (2002)'s two- regime Threshold Vector Error Correction Model (TVECM) was estimated by the maximum likelihood approach for evaluate the price transmission mechanism. Results of ADF and PP unit root tests show that both farm and retail prices are integrated in order 1 and the results of Johansson co-integration test suggests that there is a long- run relationship between the two series of price. In the next step, the result of Sup-LM test indicates that there is non-linear co-integration relation between two variables. Finally, based on the results of estimated error correction coefficients in TVECM, the price transmission has asymmetry behavior and both of the retail and farm prices response to positive shocks more than negative, especially retailers increase prices more fast than the farmers when the other prices increase. By declining the price in one level of the market, farmers would be response more quick than the retailers.

Keywords

References

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