Price transmission along the Greek food supply chain in a dynamic panel framework: empirical evidence from the implementation of decoupling

Abstract

This study investigates the price transmission mechanism between the producer and the consumer of the Greek food market while taking into consideration the decoupling policy scheme of the Common Agricultural Policy of the European Union. The empirical analysis uses the panel vector error correction model for the empirical investigation of the price mechanism. The dynamics of the price mechanism are evaluated in the short and long run with causality tests and impulse responses. The results show that the producer does not respond to long-run deviations from the equilibrium. Moreover, a shock in the producer or the consumer prices results in own disequilibrium effects that are quickly decayed and disequilibrium spillover effects from one price level to the other that take time to decay. Finally, the implementation of the decoupling scheme seems to have benefited the consumer more rather than the producer in mitigating his responses to own and cross-price shocks.