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A measure of marketing price transmission in the rice market of Taiwan

Author

Listed:
  • Kuan-Min Wang

    (Overseas Chinese University,Taichung, Taiwan)

  • Yuan-Ming Lee

    (Southern Taiwan University, Tainan, Taiwan)

Abstract

The goal of this paper is to test whether changes in the marketing margin between the farm and the retail prices can result in an asymmetric relationship between the farm and the retail prices in the rice market of Taiwan. By separating the transaction cost variation into two regimes, this paper utilizes a two-regime TVECM with the error correction term serving as the threshold variable to create a non-linear threshold model. The empirical results show that when the marketing margin is lower than the threshold value, the market system operates freely and there is feedback between the farm and retail prices. However, when the marketing margin is higher than the threshold value, the government intervenes in the market and the causality between the farm and retail prices no longer exists. The conclusions are as follows. Changes in the marketing margin can cause the asymmetric price transmission between the farm and retail prices in Taiwan’s rice markets; therefore, ignoring the effect of the marketing margin could lead to errors in the models. When the marketing margin is higher than the threshold value, the government intervenes in the market and the causality between the two prices is broken.

Suggested Citation

  • Kuan-Min Wang & Yuan-Ming Lee, 2009. "A measure of marketing price transmission in the rice market of Taiwan," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 27(2), pages 311-326.
    • Handle: RePEc:rfe:zbefri:v:27:y:2009:i:2:p:311-326
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    References listed on IDEAS

    as
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    Cited by:

    1. Mayaka, Venny K., 2013. "An Assessment Of Dry Beans Market Integration In Selected Markets In Kenya," Research Theses 157599, Collaborative Masters Program in Agricultural and Applied Economics.

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    More about this item

    Keywords

    marketing margin; price transmission; price asymmetry; threshold model; TVECM;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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