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The role of fuel prices on the wholesale price relationships between horticultural markets

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  • Valdes, R.
  • Von Cramon, S.
  • Engler, A.

Abstract

There is a notable absence of careful empirical analysis of the link between agricultural and fuel prices in spatially separated markets within developing countries. The aim of this article is to analyze the influence of fuel prices on the spatial price transmission between both a central and a regional horticultural market in Chile. We implement a regime-dependent vector error correction model where price transmission parameters depend to the dynamics imposed by a stationary exogenous variable, which in our case is the Chilean fuel price. We identified two price transmission regimes characterized by different equilibrium relationships and short-run adjustment processes. This implies that fuel prices affect price transmission elasticities and the speed of adjustments between spatially separated markets. The results suggest that fuel prices affect wholesale prices through transport costs and that there is a pattern of increasing marketing costs as the distance from origin to market grows. Also, the extent of that impact depends on each product ?s attributes, such as, transport and storage method, seasonality issues and perishability, among others. Acknowledgement : Funding for this research comes from the Chilean Commission for Scientific and Technological Research (CONICYT)-Folio No. 21120286.

Suggested Citation

  • Valdes, R. & Von Cramon, S. & Engler, A., 2018. "The role of fuel prices on the wholesale price relationships between horticultural markets," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277064, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277064
    DOI: 10.22004/ag.econ.277064
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