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Price Transmission Mechanism among Disaggregated Processing Stages of Food: Demand-Pull or Cost-Push?

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  • Kwon, Dae-Heum
  • Koo, Won W.

Abstract

The recent concurrent surges of food and commodity prices renew the debate on the causal directions between producer and consumer prices. To address this issue, we utilize the stage of processing system incorporating retail stage beyond crude, intermediate, and finished processing stages of food and employ the method proposed by Toda and Yamamoto (1995) and Dolado and Lütkepohl (1996) of Granger causality tests. The overall results show that consistent with theory of derived demand, the demand-pull mechanism coexisted with the cost-push processes in 1985-2001. However, the upward cost-push pressures dominate the demand-pull mechanism through various transmission channels in 2002-2008.

Suggested Citation

  • Kwon, Dae-Heum & Koo, Won W., 2013. "Price Transmission Mechanism among Disaggregated Processing Stages of Food: Demand-Pull or Cost-Push?," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 35(5), January.
  • Handle: RePEc:ags:jordng:175281
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    References listed on IDEAS

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    1. Goodwin, Barry K. & Harper, Daniel C., 2000. "Price Transmission, Threshold Behavior, And Asymmetric Adjustment In The U.S. Pork Sector," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(03), December.
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    4. Willie Belton & Usha Nair-Reichert, 2007. "Inflation regimes, core inflation measures and the relationship between producer and consumer price inflation," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1295-1305.
    5. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    6. Milton S. Boyd & B. Wade Brorsen, 1988. "Price Asymmetry in the U.S. Pork Marketing Channel," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(1), pages 103-109.
    7. Kauppi, Heikki, 2004. "On The Robustness Of Hypothesis Testing Based On Fully Modified Vector Autoregression When Some Roots Are Almost One," Econometric Theory, Cambridge University Press, vol. 20(02), pages 341-359, April.
    8. Colclough, William G. & Lange, Mark D., 1982. "Empirical evidence of causality from consumer to wholesale prices," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 379-384, August.
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