Modeling asymmetric price transmission in the European food market

In this study, we employ a multivariate panel error correction model (PVECM) to investigate asymmetric price transmission among the farm, processor, and retail segments of the European food supply chain for the 2005–2016 period. The results indicate that, in both the long- and short-run, retail prices respond more strongly to processor price increases than decreases and the same occurs for processor prices due to farm price changes. Thus, the findings demonstrate the presence of positive asymmetric price transmission in the European food supply chain. Finally, the results of the present study indicate that the food price pass-through varies greatly across product category and across countries, and that the pass-through to producer prices is greater than that to consumer prices.     

Evaluating market efficiency without price data: the Swedish market for wood fuel

The overall objective of this paper is to analyse the price development and price formation for wood fuel used by the Swedish district heating sector. According to Lönner et al., there is a significant potential for increasing the use of wood fuel in Sweden, at a fairly moderate cost. The basic question raised in this paper is then why this potential is not realized. Specifically, a methodology is proposed for testing whether the reason is that market imperfections are present. As a first step the shape of the technology in the Swedish district heating sector is estimated for the period 1989 to 1996. In the second step the estimated technology and the assumption of cost-minimizing firms are combined to calculate shadow prices, i.e. marginal valuation of wood fuel in this sector. If the average shadow price significantly deviates from the average observed price one may conclude that this market is functioning inefficiently due to imperfections. According to constructed bootstrap confidence intervals this difference is significant only for three out of eight years, implying that the quantities of wood fuel traded are too small. For the other years the difference is not significant, implying that one cannot, on statistical grounds, reject the efficient market hypothesis for all years.     

The asymmetric information and price manipulation in stock market

The interaction between asymmetrically informed traders has been mostly investigated in theoretical frameworks. Not only there are relatively few empirical studies but, if any, the mostly focus on cross-sectional analysis and use very short samples. In this study, we blend theoretic with empirical, and propose a new signalling system of turning points in the economy to examine the extent of volatility of these markets relative to their tranquil periods. The signalling system proposed here is based on the Markov-switching model. Differing from the existing literatures, the study employs three phases and time-varying transition probability, and captures the states of volatility. After examining the causality between high volatility and foreign portfolio investment (FPI) by using moving average and generalized autoregressive conditional heteroskedasticity, the portfolio's profitability of FPI and individual investors in different periods are compared. Finally, the investigation of FPI's leading effect is studied.     

The asymmetric price adjustment between REIT and stock markets in Asia-Pacific markets

This paper applies the threshold error correction model to examine the relationship for real estate investment trusts (REITs) and stock, and their asymmetric adjustment behaviors in six Asian/Pacific financial markets: Australia, Japan, Singapore, Taiwan, Korea, and Hong Kong. Our results show that there has been long-term equilibrium in REIT and stock indices in most of these markets. To earn exceptional profits, it is recommended that investors can sell (buy) the REITs when the indices of REITs are lower (higher) than equilibrium in Australia, Singapore and Taiwan; on the other hand, they should sell (buy) when the REIT market goes up (down) in Hong Kong and Japan. A causality test revealed that previous information about stocks predicted changes in the REITs in all the Asian/Pacific markets. One can also find that the lead–lag relationships are significant. The threshold EC model predicts two-way causality under both the regimes for the financial markets in most countries during all the sample periods. In addition, the adjustment speeds for the stock indices are faster than that for the REIT indices as disequilibrium occurs. This paper also finds that the previous mentioned trading strategies generally remained the same during the period of sub-prime mortgage crisis. However, the threshold EC model predicts one-way causality for both the regimes for the financial markets in most countries during this crisis period. In addition, we also find that the severe shock in REIT markets led investors in Australia and Taiwan to be more conservative during this period. The REIT indices had more effect on stock indices after the sub-prime mortgage crisis. According to the empirical results, we can infer that the degree of market imbalance and the occurrence of the sub-prime mortgage crisis induce the changes in the investment behavior of market participants.     

Using threshold cointegration to estimate asymmetric price transmission in the Swiss pork market

This paper employs threshold cointegration tests that allow for asymmetric adjustment towards a long-run equilibrium relationship to examine the relationship between producer and retail pork prices in Switzerland. The short-run adjustments are also examined with asymmetric error correction models that are compared to the conventional symmetric error correction models. The results indicate that price transmission between the producer and retail levels is asymmetric, in the sense that increases in producer prices that lead to declines in marketing margins are passed on more quickly to retail prices than decreases in producer prices that result in increases in the marketing margins.     

Determinants of price adjustment

This paper reports results of an empirical study investigating the adjustment speed of prices to change in costs and demand. Particular emphasis is laid on the impact of concentration on the adjustment speed. In addition, the effects of the business cycle and capital intensity are considered. It shows that concentrated industries tend to adjust prices faster, while capital intensity has a negative impact. Prices are more flexible during an upswing than in times of a recession.     

Scale economies with regard to price adjustment costs and the speed of price adjustment in Australian manufacturing

This paper aims to examine the impact of firm size, industry concentration and the length of production on industry speed of price adjustment. To motivate the paper, an industry pricing model in error correction form is derived from firm pricing behaviour. As a new development, firms are assumed to have price adjustment costs that are a function of their size. The empirical model is estimated using two‐digit Australian manufacturing industry data for the period 1994:3 to 2006:1. The results suggest that the industry speed of price adjustment is positively related to firm size and negatively related to industry concentration and the production lag. Implied values for industry speeds of price adjustment are generally small when compared to other country industry studies. However, the industry average median lag of 7.1 quarters indicates a slightly faster speed of price adjustment than the estimate for the Australian consumer price index by Dwyer and Leong (2001 Dwyer, J. and Leong, K. 2001. Changes in the determination of inflation in Australia 1–44. Reserve Bank of Australia Research Discussion Paper 2001‐02 [Google Scholar]).     

Industry structure and the dynamics of price adjustment

Using annual US data for gross domestic product originating by sector between 1947 and 1997 it is shown that a negative long-run relationship between inflation and the markup is present across the sectors as well as in the aggregate data. A preliminary explanation based on industry structure is explored for the relative sizes of the impact of inflation on the markup in the long-run for the various sectors.     

On the design of regulatory price adjustment mechanisms

Price adjustment mechanisms are employed in the electric utility industry to pass changes in fuel costs on to consumers without formal rate review by a regulatory commission. The predictability of this pass-through and the regulator's limited ability to observe the actions of a firm can create potential incentive problems associated with the choices of technology and fuel supply. This paper is concerned with the regulatory design of pass-through formulas when a factor price is uncertain. The optimal design involves deviating from the full-information optimal price formulas in order to mitigate the incentive problems.     

The economics of the Swedish online gambling market

In this article, we study how the Swedish online gambling market has developed and how the availability of foreign-based online gambling has affected the domestic state-owned gambling monopoly, AB Svenska Spel. We find that online gambling and the traditional state-managed gambling are relatively weak substitutes. Thus, concerns about the availability of online gambling being able to undercut domestic gambling policies may be overstated.     

Reconsideration of the P-bar model of gradual price adjustment

This paper compares the P-bar model of price adjustment with the currently dominant Calvo specification. Theoretically, the P-bar model is more attractive as it depends on adjustment costs for physical quantities rather than nominal prices, while incorporating a one-period information lag. Furthermore, the resulting adjustment relation is more completely free of “money illusion,” in terms of dynamic relationships, and therefore satisfies the natural-rate hypothesis of Lucas [1972a. Econometric testing of the natural rate hypothesis. In: Eckstein, O. (Ed.), The Econometrics of Price Determination. Board of Governors of the Federal Reserve System], which is not satisfied by the Calvo model in any of its variants. Along the way, it shows that both the P-bar and Calvo models can be formulated in distinct versions in which current real wages are, or are not, allocative. Quantitatively, for a given calibration of the demand parameters, the implied time-series properties of the inflation rate, output gap, and nominal interest rate are determined for various policy parameters, and are compared with quarterly data for the US economy. Neither model dominates but, overall, the comparison seems somewhat more favorable to the P-bar model and certainly does not provide support for the dominant position held by the Calvo model in current monetary policy analysis.     

A model of profits and market adjustment

A market adjustment process is analyzed, where the prevailing rate of profit affects the rates of change of quantity produced and unit cost of production. Only under special conditions does the process lead to a steady-state where the rate of profit is zero.     

Some quasi-globally stable processes of price adjustment

In this paper, the existence of some quasi-globally stable processes of price adjustment in a perfectly competitive market, is proved. These processes are relative to a special class of “excess demand” vector fields satisfying regularity hypotheses and boundary conditions of classical type. Modifications of the above processes which, under different hypotheses, are still quasi-globally stable, are studied.     

Production and price smoothing by inventory adjustment?

The present paper examines the role of inventories for the short run adjustment behavior of firms. A theoretical model of a monopolistic firm carrying inventories that includes costs of adjusting output is examined. The model is tested empirically by using business survey data collected by the IFO-Institute, Munich. It is shown, that if data on individual firms are used and econometric estimation techniques are applied that properly take this into account, the estimates derived are fully compatible with the appealing idea of production smoothing by inventories.     

Price transmission and asymmetric adjustment in the Spanish dairy sector

Asymmetric threshold vector error correction models are applied to monthly price data to analyse price relationships and patterns of transmission among farm and retail markets for a variety of dairy products in Spain. The results suggest that asymmetries affect a conspicuous part of the raw milk processed in Spain. Implications for the organizational structure of Spanish dairy markets are offered.