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Milking The Prices: The Role of Asymmetries in the Price Transmission Mechanism for Milk Products in Austria

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  • Octavio Fern?ndez-Amador

    ()

  • Josef Baumgartner

    ()

  • Jes?s Crespo-Cuaresma

    ()

Abstract

We assess empirically the vertical price transmission mechanism between producer and consumer prices of milk products in Austria using monthly data for the period from January 1996 to February 2010. We consider explicitly the existence of asymmetries in the adjustment to the long-run equilibrium using two different types of threshold vector error correction (VEC) models, where an inaction band in the adjustment to the long-run relationship is defined and alternatively where price dynamics differ between periods of increasing and decreasing trends in causal prices. Our results indicate that asymmetries play an important role in the pass-through of prices for milk products in Austria. We provide statistical evidence concerning the fact that the adjustment only tends to take place when deviations from the equilibrium are large enough. Milk, dairy and cheese products and butter tend to remain in positive margins (measured as deviations from the long-run equilibrium) for the retailers' side. The explicit modeling of nonlinearities does not improve out-of-sample forecasting performance.

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Bibliographic Info

Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2010-21.

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Length: 24
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:inn:wpaper:2010-21

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Keywords: Asymmetric price transmission; threshold models; cointegration; milk prices.;

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Cited by:
  1. Diego Romero-�vila & Carlos Usabiaga, 2012. "Disaggregate evidence on Spanish inflation persistence," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 3029-3046, August.
  2. Bakucs, Lajos Zoltan & Falkowski, Jan & Ferto, Imre, 2012. "What causes asymmetric price transmission in agro-food sector? Meta-analysis perspective," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134765, Agricultural Economics Society.
  3. Loy, Jens-Peter & Holm, Thore & Steinhagen, Carsten, 2012. "Vertical Price Transmission In Differentiated Product Markets: A Disaggregated Study For Milk And Butter," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123284, Agricultural and Applied Economics Association.
  4. Holm, Thore & Loy, Jens-Peter & Steinhagen, Carsten, 2012. "Bio Auch Bei Der Preissetzung: Konsummilch In Deutschland," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137159, German Association of Agricultural Economists (GEWISOLA).
  5. Fabio Rumler, 2012. "The Pass-Through of Commodity Prices to Consumer Prices of Selected Products," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 92–104.
  6. Seyed Safdar Hosseini & Zahra Alizadeh Khalifehmahaleh, 2013. "Market Structure and Price Adjustment in the Iranian Tea Market," Iranian Economic Review, Economics faculty of Tehran university, vol. 18(2), pages 1-19, spring.

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