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A comparison of asymmetric price transmission from global to domestic markets between high and low quality grains: a case of Afghan rice markets

Author

Listed:
  • Najibullah Hassanzoy

    (Kyushu University)

  • Shoichi Ito

    (Kyushu University)

  • Hiroshi Isoda

    (Kyushu University)

  • Yuichiro Amekawa

    (Kyushu University)

Abstract

This study compares the magnitude of price transmission and speed of adjustment towards equilibrium between global and domestic prices of high and low quality rice under asymmetric equilibrium adjustment. The dynamics of price transmission are examined using asymmetric vector error correction models. A structural break is considered in testing for unit roots and cointegration. Interestingly, the findings indicate that the magnitude of price transmission and speed of adjustment may be different between high and low quality rice prices. The speed of adjustment may be faster for high quality rice prices whereas the magnitude of price transmission appears to be greater for those of low quality rice. Moreover, domestic prices of high and low quality rice exposed asymmetric adjustment to divergence from the long-run equilibrium with adjustment being faster and significant to positive than negative deviation from the equilibrium. It is also observed that the Granger causality possibly runs from global to domestic rice prices. The results implies that considering rice as a differentiated commodity in the price transmission analysis may improve our understanding of the relationship between global and domestic rice markets and enhance the effectiveness of policy proposals for developing the rice markets and reducing the vulnerability of the poor households to shocks in the rice markets.

Suggested Citation

  • Najibullah Hassanzoy & Shoichi Ito & Hiroshi Isoda & Yuichiro Amekawa, 2016. "A comparison of asymmetric price transmission from global to domestic markets between high and low quality grains: a case of Afghan rice markets," Economics Bulletin, AccessEcon, vol. 36(1), pages 537-552.
    • Handle: RePEc:ebl:ecbull:eb-15-00640
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    References listed on IDEAS

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    Cited by:

    1. Hassanzoy, Najibullah & Ito, Shoichi & Isoda, Hiroshi & Amekawa, Yuichiro, 2016. "The Effects Of Swings In Global Wheat Prices On The Domestic Markets In Afghanistan," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(4), pages 1-14, October.
    2. Bairagi, S. & Mohanty, S., 2018. "Analysis of Price Transmission along the Cambodian Rice Value Chain," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277022, International Association of Agricultural Economists.
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    More about this item

    Keywords

    Asymmetric price transmission; threshold cointegration; global and domestic rice markets; high and low quality rice prices; Afghanistan;
    All these keywords.

    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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