The Dynamics and Volatility of Prices in a Vertical Sector

Abstract

This paper studies the evolving distribution of prices in a vertical sector in the presence of market cycles. It investigates the dynamic linkages between farm and retail prices with an application to the Chinese pork sector. The econometric approach relies on a quantile autoregressive (QAR) model that provides a flexible representation of the dynamics of price volatility. It investigates the presence and nature of price cycles and their implications for price transmission. We document that the marketing margin is more sensitive to changes in consumer income than in feed cost. In addition, rising feed cost increases the amplitude of the cycle while higher consumer income increases the period of the cycle.

When cointegration is interrupted: Price transmission analysis in the Italian dairy‐feed industry

“…Finally, other scholars attempt to disentangle the role of different variables on the behavior of PT, for which the application of the ITC model may be beneficial for allowing interruptions along the long-run relationship between prices and for spotting different regimes according to the trigger. Lundberg et al (2021) investigate the relationship between oil and agricultural commodity prices accounting for heterogeneity across time horizons, while Chavas and Pan (2020) study dynamic linkages between farm and retail pork prices in China, disentangling how consumer income and feed costs shape the price relationship.…”

Price Transmission of Melons (Cucumis Melo and Citrullus Lanatus) in Myanmar – China Border Trade

“…There are two types of price transmission: vertical and spatial. While the price changes along the supply chain of a commodity relate to vertical price transmission (Chavas and Pan, 2019), the way price is transmitted from one market to another relates to spatial price transmission (Wright et al, 2021;Durborow et al, 2020,). While the two markets studied here are in different locations, Myanmar is a supply location and China is a consuming location (at least during the time studied).…”

“…Most related studies find that information flows up the marketing channel (Chavas and Pan, 2019). This is generally explained by supply shocks being a more important driver of price movements than demand shocks.…”

Poder de mercado y transmisión asimétrica de precios en Chile: el caso de la carne bovina y porcina

“…Autores como Geweke (2004), Meyer y von Cramon-Taubadel ( 2005) y Frey y Manera ( 2007) realizaron importantes trabajos de revisión de literatura en los cuales clasificaron los estudios por país y commodities, y advirtieron alta heterogeneidad en términos de modelos econométricos. Al respecto, los desarrollos incluyen aplicaciones a modelos autorregresivos de rezagos distributivos (Farrell, 1952; Wolffram, 1971; Houck, 1977, modelos de corrección de error con o sin linealidades en los mecanismos de transmisión de precios (Meyer, 2004; Cudjoe et al, 2010; Brosig et al, 2011; Götz et al, 2013; Tansuchat et al, 2016; Troncoso-Sepúlveda, 2019) y la implementación de modelos de cuantiles autorregresivos para estudiar desde una perspectiva integrada, elementos como la evolución de la distribución, existencia ciclos y su impacto en la APT agrícolas (Chavas & Pan, 2019).…”