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Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry

  • Abbassi, Abdessalem
  • Tamini, Lota D.
  • Gervais, Jean-Philippe

This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible non-linear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30868.

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Date of creation: 01 Jan 2011
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Handle: RePEc:pra:mprapa:30868
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  12. Gervais, Jean-Philippe, 2007. "Disentangling non-linearities in the long- and short-run price relationships: An application to the U.S. hog/Pork supply chain," MPRA Paper 7743, University Library of Munich, Germany, revised 15 Jan 2008.
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  15. Jean-Philippe Gervais & Stephen Devadoss, 2006. "Estimating bargaining strengths of Canadian chicken producers and processors using a bilateral monopoly framework," Agribusiness, John Wiley & Sons, Ltd., vol. 22(2), pages 159-173.
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  20. Murray Fulton & Yongmei Tang, 1999. "Testing the Competitiveness of a Multistage Food Marketing System: The Canadian Chicken Industry," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 47(3), pages 225-250, November.
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