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Price linkages in major EU virgin olive oil markets

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  • Theofanous, Pamela
  • Tremma, Ourania

Abstract

This study examines the price relationships between the three major EU olive oil markets; Spain, Italy and Greece. The empirical analysis utilises a series of linear and non-linear econometric techniques to explore long and short run relations examining market integration as well as the pattern of price transmission. The study utilises monthly wholesale data for virgin olive oil for the three countries, covering the period January 2000 to April 2022. Results from the Diks and Panchenko nonlinear causality test suggest Spain to be the central market and stable long-run relations are revealed between the examined price pairs through the non-linear Momentum Threshold Cointegration model, with the strongest relation being identified between Italy and Greece. Regarding the pattern of price transmission, it is found to be asymmetric for the pairs Spain-Greece and Spain-Italy, whereas for price pair Italy-Greece symmetry is confirmed, and the Law of One Price holds in its strong version. This suggests that while the markets are integrated, the EU olive oil market is characterised by inefficiencies indicating the need for further reforms.

Suggested Citation

  • Theofanous, Pamela & Tremma, Ourania, 2024. "Price linkages in major EU virgin olive oil markets," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    • Handle: RePEc:eee:joecas:v:30:y:2024:i:c:s1703494924000094
    DOI: 10.1016/j.jeca.2024.e00360
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