Disentangling nonlinearities in the long- and short-run price relationships: an application to the US hog/pork supply chain

Abstract

Increased concentration at the retail, food processing and farm input manufacturing levels has brought increased attention to patterns in retail-to-farm price spreads. Most studies documenting asymmetric price transmission focus on non-linear error correction processes, as opposed to the current study which analyzes potential non-linearities in the long-run relationship between the farm and retail prices. The null hypothesis of non-linearity in the long-run relationship between farm and retail prices in the U.S. hog/pork supply chain is rejected in favor of a Smooth Transition Cointegration (STC) framework. The STC framework predicts downward price stickiness in retail prices. The predicted residuals of the non-linear model are used to investigate whether it is possible to disentangle non-linearity in the long-run price relationship from non-linearity in the adjustment towards the long-run equilibrium. The results underline the importance of testing for linearity in the long-run price relationship before modeling non-linearity in short-run dynamics.

The Effects of Agricultural Price Instability on Vertical Price Transmission: A Study of the Wheat Chain in Italy

“…Much of the research has investigated case studies in Hungary [38][39][40][41], Spain [42][43][44][45], Greece [46,47] and the USA [23,[48][49][50]. Topic-wise, most of the international literature has focused on animal-based products (such as milk and different types of meat and eggs) [39][40][41][42][43][44][45][46][48][49][50][51][52][53], while fewer studies have focused on fruit and vegetable products or bread [38,47,54]. Brunner et al [13] studied price transmission focusing on the wheat flour case.…”

A Copula-Based Approach to Investigate Vertical Shock Price Transmission in the Italian Hog Market

“…Other models are based on non-stationary feature of time series data, by means of co-in-tegration techniques, see e.g. the regime-switching model of Serra and Goodwin (2003) or the asymmetric long run price linkage of Gervais (2011) and price transmission elasticity of Abbassi et al (2012).…”

Vertical price dependence structures: copula-based evidence from the beef supply chain in the USA

“…Fewer studies allowed for asymmetries in both the speed and the magnitude of price transmission (e.g. Lass, 2005;Gervais, 2011). Although the findings appear to depend on the methods employed, the time period considered and the type of data used, the majority of earlier empirical works has obtained some evidence of asymmetric price transmission regarding either its speed or its magnitude or even both.…”