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The effects of E. coli 0157:H7, FMD and BSE on Japanese retail beef prices: A historical decomposition

  • Sayed H. Saghaian

    (Department of Agricultural Economics, 314 Charles E. Barnhart Building, University of Kentucky, Lexington, KY 40546)

  • Leigh J. Maynard

    (Department of Agricultural Economics, 319 Charles E. Barnhart Building, University of Kentucky, Lexington, KY 40546)

  • Michael R. Reed

    (Department of Agricultural Economics, 308 Charles E. Barnhart Building, University of Kentucky, Lexington, KY 40546)

This study examines Japanese retail price reactions to the 2001 bovine spongiform encephalopathy (BSE) discovery, the 2000 outbreak of foot and mouth disease (FMD), and the 1996 E. coli food poisoning events. Historical decomposition of retail-level price series aids in explaining the behavior of beef prices in a neighborhood (period-by-period time interval) of the three events. This is based on an application of directed acyclic graphs, constructing orthogonal innovations to determine causal patterns behind contemporaneous innovations. The results show that the beef safety and animal health events had different negative impacts on Japanese retail beef prices, suggesting that consumers understood and differentiated among the health risks. The results provide incentives for beef producers and retailers to inform consumers proactively about ongoing beef safety and animal health measures. Understanding consumer reaction to BSE, FMD, and E. coli helps the beef industry restore consumer confidence after future crises, and provides policy makers a basis for countermeasures and compensations. [EconLit citations: Q11, Q13]. © 2007 Wiley Periodicals, Inc. Agribusiness 23: 131-147, 2007.

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File URL: http://hdl.handle.net/10.1002/agr.20106
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Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 23 (2007)
Issue (Month): 1 ()
Pages: 131-147

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Handle: RePEc:wly:agribz:v:23:y:2007:i:1:p:131-147
Contact details of provider: Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Lusk, Jayson L. & Schroeder, Ted C., 2000. "Effects Of Meat Recalls On Futures Market Prices," 2000 Conference, April 17-18 2000, Chicago, Illinois 18925, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  2. Fox, John A. & Peterson, Hikaru Hanawa, 2002. "Bovine Spongiform Encephalopathy (Bse): Risks And Implications For The United States," 2002 Conference, April 22-23, 2002, St. Louis, Missouri 19061, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
  3. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
  4. Livanis, Grigorios T. & Moss, Charles B., 2005. "Price Transmission and Food Scares in the U.S. Beef Sector," Working Papers 15662, University of Florida, International Agricultural Trade and Policy Center.
  5. Ben S. Bernanke, 1986. "Alternative Explanations of the Money-Income Correlation," NBER Working Papers 1842, National Bureau of Economic Research, Inc.
  6. Paarlberg, Philip L. & Lee, John G. & Seitzinger, Ann Hillberg, 2003. "Measuring Welfare Effects of an FMD Outbreak in the United States," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(01), April.
  7. Hyun J. Jin & Won W. Koo, 2003. "The effect of the BSE outbreak in Japan on consumers' preferences," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(2), pages 173-192, June.
  8. Saghaian, Sayed H. & Hasan, Mohamad F. & Reed, Michael R., 2002. "Overshooting Of Agricultural Prices In Four Asian Economies," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 34(01), April.
  9. Erikson, Glade R. & Wahl, Thomas I. & Jussaume, Raymond A., Jr. & Shi, Hongqi, 1998. "Product Characteristics Affecting Consumers' Fresh Beef Cut Purchasing Decisions In The United States, Japan, And Australia," Journal of Food Distribution Research, Food Distribution Research Society, vol. 29(3), November.
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