Investigating the Price Transmission Mechanisms of Greek Fresh Potatoes, Tomatoes and Cucumbers Markets

Abstract

This study investigates the price transmission mechanisms between the producer and the consumer for three major Greek agricultural products: fresh potatoes, tomatoes and cucumbers. The empirical analysis uses a Markov Switching Vector Error Correction model which accounts for asymmetric responses of the producer and the consumer to price increases and decreases. The asymmetric effects are tested with in-sample as well as out-ofsample measures for each state. The response of the producer and the consumer to long-run deviations from the equilibrium and to lagged price changes is investigated along with the nature of the price shocks for each state. The empirical results show that potatoes and cucumbers give rise to similar price mechanisms even though the underlying characteristics of these two markets are different. Moreover, the empirical analysis shows that tomatoes and cucumbers result in different price relationships between the producer and the consumer despite the similar market characteristics.

Towards better understanding of vegetable market functioning: The Lithuanian cases of fresh tomatoes and cucumbers

“…The results contradict to Rezitis and Pachis (2013) findings showing two-way causality in tomato supply chain. It should be noted that the later research conducted by Rezitis and Pachis (2016) evidences that the results of the Granger causality test could differ under different volatility regimes and switch from two-way to one-way direction. As a result, the selected methodological framework and data could lead to different outcomes.…”

“…The results depend on the selected for the analysis stakeholders’ level (Girapunthong et al, 2003; Munyeka, 2014; Rezitis and Pachis, 2016) or price transmission research horizon (Rezitis and Pachis, 2016). The conducted studies show the evidence of both negative and positive asymmetry (Ahmed, 2018; Girapunthong et al, 2003; Rezitis and Pachis, 2016; Ward, 1982) and provide limited possibility to make a coherent picture of the phenomenon. Thus, the feature of perishability cannot be a main explanatory factor for asymmetric price behaviour and other characteristics of the particular markets are important.…”

“…The long- and short-run effects of price changes among the Greek tomato (Rezitis and Pachis, 2013, 2016) and cucumber (Rezitis and Pachis, 2016) supply chains were investigated applying different states of price volatility. According to studies, the behaviour of prices along the chains of cucumbers and tomatoes differed significantly, and findings questioned the impact of the Common Market Organization on the domestic supply chains of different fruits and vegetables in EU Member States.…”

“…The reviewed studies show the evolution of price transmission estimation methodologies towards more sophisticated approaches. However, the most commonly applied elements of methodological frameworks include unit root tests (Aguiar and Santana, 2002; Ahmed, 2018; Ait Sidhoum and Serra, 2016; Bakucs et al, 2007; Jeder et al, 2017; Munyeka, 2014; Rezitis and Pachis, 2013, 2016; Santeramo and Von Cramon-Taubadel, 2016), the Johansen or the Engle–Granger co-integration test (Bakucs et al, 2007; Jeder et al, 2017; Munyeka, 2014; Rezitis and Pachis, 2013, 2016), various methods based on the estimation of error correction model (ECM) (Ait Sidhoum and Serra, 2016; Bakucs et al, 2007; Jeder et al, 2017; Munyeka, 2014; Rezitis and Pachis, 2013, 2016; Santeramo and Von Cramon-Taubadel, 2016), the Granger causality test (Aguiar and Santana, 2002; Bakucs et al, 2007; Jeder et al, 2017; Munyeka, 2014; Rezitis and Pachis, 2013, 2016; Ward, 1982) and different tests for the identification of asymmetric behaviour (Aguiar and Santana, 2002; Bakucs et al, 2007; Jeder et al, 2017; Munyeka, 2014; Parrott et al, 2001; Rezitis and Pachis, 2016; Santeramo and Von Cramon-Taubadel 2016; Ward, 1982).…”

“…Most of the academic studies on price transmission in agriculture could be classified in accordance with their research direction. The largest share of publications introduces the empirical research on price transmission and confirms market failures or the efficient functioning of supply chains applying different methodologies (Aguiar and Santana, 2002; Ahmed, 2018; Ait Sidhoum and Serra, 2016; Bakucs et al, 2007; Girapunthong et al, 2003; Jeder et al, 2017; Munyeka, 2014; Myae et al, 2006; Rezitis and Pachis, 2013, 2016). An important research direction includes explanatory studies.…”