Abbassi, Abdessalem and Tamini, Lota D. and Gervais, Jean-Philippe (2011): Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry.
Download (242Kb) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry|
|Keywords:||Asymmetric price transmission; inventories|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C30 - General
|Depositing User:||ABDESSALEM ABDESSALEM|
|Date Deposited:||11. May 2011 20:43|
|Last Modified:||13. Feb 2013 20:57|
Abbassi, A. and J-P. Gervais. 2010. Evaluating Reforms in Canadian Chicken Marketing Mechanisms Using a Linear-quadratic Inventory Model. Journal of Agricultural and Food Industrial Organization 8: Article 1.
Abdulai, A. 2002. Using Threshold Cointegration to Estimate Asymmetric Price Transmission in the Swiss Pork Market. Applied Economics 34: 679-687
Azzam, A. 1999. Asymmetry and Rigidity in Farm-Retail Price Transmission. American Journal of Agricultural Economics 81: 525-533.
Ben-Kaabia, M. and J. M. Gil. 2007. Asymmetric Price Transmission in the Spanish Lamb Sector. European Review of Agricultural Economics 34: 53-80.
Blanchard, O. 1983. The Production and Inventory Behavior of the American Automobile Industry. Journal of Political Economy 91: 365-400.
Borenstein, S., and A. Shepard. 2002. Sticky Prices, Inventories, and Market Power in Wholesale Gasoline Markets. The RAND Journal of Economics 33: 116-139.
Borenstein, S., C. Cameron, and R. Gilbert. 1997. Do Gasoline Prices Respond Asymmetrically to Crude Oil Price Changes. The Quarterly Journal of Economics 112: 305-339.
Carman, H.F. and R.J. Sexton. 2005. Supermarket Fluid Milk Pricing Practices in the Western United States. Agribusiness 21: 509-530.
Chavas, J-P., and A. Mehta. 2004. Price Dynamics in a Vertical Sector: The Case of Butter. American Journal of Agricultural Economics 86: 1078-1093.
Davidson, R. & J.G. MacKinnon, 1993, Estimation and Inference in Econometrics, Oxford University Press, New York, NY.
Deaton, A., and G. Laroque. 1992. On the Behaviour of Commodity Prices. Review of Economic Studies 59: 1-23.
Fousekis, P. 2008. Further Results on Assymetry in Farm-Retail Price Transmission under Spatial Monopoly. Journal of Agricultural and Food Industrial Organization 6(1): Article 7. Available at: http://www.bepress.com/jafio/vol6/iss1/art7
Frey, G., and M. Manera. 2007. Econometric Models of Asymmetric Price Transmission. Journal of Economic Surveys 21: 349-367.
Fulton, M. and Y. Tang. 1999. Testing the Competitiveness of a Multistage Food Marketing System: The Canadian Chicken Industry. Canadian Journal of Agricultural Economics 47: 225-250.
Gervais, J-P., S. Devadoss. 2006. Estimation Bargaining Strengths of Canadian Chicken Producers and Processors Using a Bilateral Monopoly Framework. Agribusiness 22: 159-173.
Gervais, J-P., K. Guillemette, and R. Romain. 2007. Output and Price Determination in the Canadian Chicken Industry: Which Should Come First? Canadian Journal of Agricultural Economics 55: 255-273.
Gervais J-P. 2010. Disentangling Non-linearities in the Long- and Short-run Price Relationships: An Application to the U.S. Hog/Pork Supply Chain. Applied Economics: Forthcoming.
Goodwin, B. K., and M. T. Holt. 1999. Asymmetric Adjustment and Price Transmission in the U.S. Beef Sector. American Journal of Agricultural Economics 81: 630-637.
Hamilton, J. D. 2001. A Parametric Approach to Flexible Nonlinear Inference. Econometrica 69: 537–573.
Hamilton, J. D. 2002. On the Interpretation of Cointegration in the Linear-Quadratic Inventory Model. Journal of Economic Dynamics and Control 26: 2037-2049.
Hamilton, J. D. 2003. What is an Oil Shock? Journal of Econometrics 113: 363–398.
Houck, J. P. 1977. An Approach to Specifying and Estimating Non-reversible Functions. American Journal of Agricultural Economics 59: 570-572
Huff, K., K. D. Meilke, and R. Amedei. 2000. Canada–United States Chicken Trade: A Re-evaluation. Canadian Journal of Agricultural Economics 48: 421-432
Imbens, G.W. 1997. One-Step Estimators for Over-Identified Generalized Method of Moments Models. Review of Economic Studies 64: 359-383.
Kesavan, S. V. Gaur., A. Raman. 2010. Do Inventory and Gross Margin Data Improve Sales Forecasts for US Public Retailers? Management Science 56 : 1519–1533
Kinnucan, H. W., and O. D. Forker. 1987. Asymmetry in Farm-Retail Price Transmission for Major Dairy Products. American Journal of Agricultural Economics 69: 285-292.
Lass, D. A. 2005. Asymmetric Response of Retail Milk Prices in the Northeast Revisited. Agribusiness 21: 495-508.
Lloyd, T. A., S. McCorriston, C. W. Morgan, and A. J. Rayner. 2006. Food Scares, Market Power and Price Transmission: the UK BSE Crisis. European Review of Agricultural Economics 33: 119-147.
Maddala, G. S., and I-M. Kim. 1998. Unit Roots, Cointegration and Structural Change. Cambridge University Press.
McCorriston, S., C. W. Morgan, and A. J. Rayner. 2001. Price Transmission: the interaction between Market Power and Returns to Scale. European Review of Agricultural Economics 28: 143-159.
Meyer, J., and S. von Cramon-Taubadel. 2004. Asymmetric Price Transmission: A Survey Journal of Agricultural Economics 55: 581-611.
Miller, D. J., and M. L. Hayenga. 2001. Price Cycles and Asymmetric Price Transmission in the U.S. Pork Industry. American Journal of Agricultural Economics 83: 551-562.
Parker, C., E, Paparoditis and D. N. Politis. 2006. Unit Root Testing via the Stationary Bootstrap. Journal of Econometrics 133: 601-638.
Rude, J. and J-P. Gervais. 2006. Tariff Rate Quota Liberalization: The Case of World Price Uncertainty and Supply Management. Canadian Journal of Agricultural Economics 54: 29-51.
Serra, T., and B. K. Goodwin. 2003. Price Transmission and Asymmetric Adjustment in the Spanish Dairy Sector. Applied Economics 35: 1889–1899.
Von Cramon-Taubadel, S. 2001. Estimating Asymmetric Price Transmission with the Error Correction Representation: An Application to the German Pork Market. European Review of Agricultural Economics 25: 1-18.
Ward, R.W. 1982. Asymmetry in Retail, Wholesale and Shipping Point Pricing for Fresh Vegetables. American Journal of Agricultural Economics 62: 205-212.
West, K. D. 1995. Inventory Models. Published in Handbook of Applied Econometrics. Edited by M. Pesaran and M. Wickens, Vol I, Macroeconomics, Basil Blackwell, Oxford.
Wohlgenant, M. K. 1985. Competitive Storage, Rational Expectations, and Short-Run Food Price Determination. American Journal of Agricultural Economics 67:739-48.
Wohlgenant, M.K. 2001. Marketing Margins: Empirical Analysis. In Handbook of Agricultural Economics, edited by B. Garnder and G. C Rausser, Vol. 1B: 933-970.
Xia, T. 2009. Asymmetric Price Transmission, Market Power, and Supply and Demand Curvature. Journal of Agricultural & Food Industrial Organization: Vol. 7 : Iss. 1, Article 6. Available at: http://www.bepress.com/jafio/vol7/iss1/art6 DOI: 10.2202/1542-0485.1261