Threshold Cointegration in the Greek Milk Market |
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Authors: | Anthony N Rezitis Ioanna Reziti |
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Institution: | 1. University of Western Greece , Agrinio, Greece arezitis@cc.uoi.gr;3. Centre of Planning and Economic Research (KEPE) , Athens, Greece |
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Abstract: | This article investigates the nonlinear adjustment between consumer and producer prices in the Greek milk sector using a threshold error correction autoregressive model. The results reject the null hypothesis of linear cointegration in favor of a 2-regime threshold cointegration model. A cointegrating relationship is expected only when equilibrium consumer price is decreased more than 24.12% or the equilibrium relative markup is squeezed more than 62.74%. In this case consumer prices have to increase faster than producer prices to restore the long-run equilibrium between consumer-producer milk prices. |
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Keywords: | milk sector price transmission threshold vector error correction model |
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