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Price Cycles and Asymmetric Price Transmission in the U.S. Pork Market
Author(s) -
Miller Douglas J.,
Hayenga Marvin L.
Publication year - 2001
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/0002-9092.00177
Subject(s) - economics , commodity , econometrics , transmission (telecommunications) , mid price , microeconomics , monetary economics , price level , telecommunications , market economy , computer science
Economists have proposed several plausible explanations for observed price transmission asymmetries in commodity markets. Unfortunately, the econometric methods commonly used in such studies cannot empirically distinguish pricing behavior under the competing theories. We argue that the theories may be classified by firm responses to high‐ and low‐frequency price cycles and use Engle's band spectrum regression to test the symmetry of high‐ and low‐frequency cycles in weekly pork prices. The findings indicate that changes in wholesale prices are asymmetrically transmitted to retail prices in relatively low‐frequency cycles, which does not support search costs and other high‐frequency explanations. Conversely, wholesale pork prices asymmetrically adjust to changes in farm prices at all frequencies.