The Impact of Avian Influenza on Vertical Price Transmission in the Egyptian Poultry Sector

In recent years, health risks have received increasing attention among consumers and created interest in analysing the relationship between food scares, food consumption and market prices. One of the most relevant and recent food scares is the avian influenza that has had important effects not only on human and animal health, but also on the economy. We assess effects of avian influenza on price transmission along the Egyptian poultry marketing chain. Although Egypt has been one of the most affected countries by avian influenza, this article is the first attempt to understand this food scare’s impacts on Egyptian poultry markets. In doing so, a multivariate smooth transition vector error correction model (STVECM) is applied to monthly poultry price data. In order to reflect consumer awareness of the crisis, an avian influenza food scare information index is developed and used within the model as a transition variable. Our results suggest that price adjustments to deviations from the market equilibrium parity depend on the magnitude of the avian influenza crisis. Results also suggest that food safety information indices, that have been widely used to assess the economic impacts of food scare crises in developed countries, also contribute to understanding the economic effects of food scare crises in developing countries.