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Farm Input, Farm Output, and Food Retail Prices: A Cointegration Analysis

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  • Larue, Bruno

Abstract

This paper investigates the adjustment mechanism between farm input prices, farm output prices, and food retail prices in Canada. Johansen's maximum likelihood approach is used in addition to the Engle-Granger approach to test for cointegration. Contrary to the common assumption that farm output prices are more flexible than farm input prices, it is found that farm output prices though cointegrated are weakly exogenous in the sense that they do not respond in a systematic manner to disequilibrium in farm input prices and food retail prices. Evidence was found to support "Cost Pushl! and "Demand Pull" theories but since food retail prices carry a heavier weight in the cointegration relations, it can be concluded that shocks manifesting themselves (first) at the retail level do not persist as long.

Suggested Citation

  • Larue, Bruno, 1991. "Farm Input, Farm Output, and Food Retail Prices: A Cointegration Analysis," Department of Agricultural Economics and Business 258676, University of Guelph.
    • Handle: RePEc:ags:uguaeb:258676
    DOI: 10.22004/ag.econ.258676
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    Cited by:

    1. Nicholas Apergis & Anthony Rezitis, 2003. "Mean spillover effects in agricultural prices: Evidence from changes in policy regimes," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(1), pages 69-78, February.
    2. Adusei Jumah, 2004. "The long run, market power and retail pricing," Empirical Economics, Springer, vol. 29(3), pages 605-620, September.
    3. Wu, Ziping & Merlean, Seamus, 2003. "Market efficiency in the reformed Chinese grain marketing system," China Economic Review, Elsevier, vol. 14(2), pages 115-130.
    4. Christos P. Pappas & Christos T. Papadas, 2015. "Farm Production Costs, Producer Prices and Retail Food Prices in Greece: A Cointegration Analysis," Bulletin of Political Economy, Bulletin of Political Economy, vol. 9(2), pages 127-143, December.
    5. Chang, Hui-Shung (Christie) & Griffith, Garry R., 1997. "Examining long run relationships among Australian beef prices," 1997 Conference (41st), January 22-24, 1997, Gold Coast, Australia 135741, Australian Agricultural and Resource Economics Society.
    6. Deodhar, Satish Y. & Venkatram R, 1999. "Dynamic Demand Analysis of India Domestic Coffee Market," IIMA Working Papers WP1999-11-05, Indian Institute of Management Ahmedabad, Research and Publication Department.
    7. José Angel Roldán Casas & Rafaela Dios-Palomares, 2004. "Contrastación de la ley de precio único en el mercado español del aceite de oliva," Economic Working Papers at Centro de Estudios Andaluces E2004/27, Centro de Estudios Andaluces.
    8. Chang, Hui-Shung (Christie) & Griffith, Garry R., 1998. "Examining long-run relationships between Australian beef prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 42(4), pages 1-19.

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