Analysis of Dairy Product Price Transmission in Hungary: A Nonlinear ARDL Model

Marwa Ben Abdallah, Maria Fekete Farkas and Zoltan Lakner
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Marwa Ben Abdallah: Doctoral School of Management and Business Administration, Szent István University, 2100 Gödöllő, Hungary
Maria Fekete Farkas: Faculty of Economics and Social Science, Szent István University, 2100 Gödöllő, Hungary
Zoltan Lakner: Department of Food Economics, Faculty of Food Science, Szent István University, 2100 Gödöllő, Hungary

Agriculture, 2020, vol. 10, issue 6, 1-14

Abstract: This paper addresses the assessment of the price transmission of dairy products in Hungary. Monthly prices are used in testing the hypothesis of asymmetric price transmission between farmers and retailers. The magnitude of short- and long-run asymmetric transmission between price levels is measured through a nonlinear autoregressive distributed model (NARDL). The cointegration of variables is validated through bounds test of the NARDL model. The estimated NARDL model proves the existence of long- and short-run asymmetric relationships between producer milk price and most retailer dairy product prices. Furthermore, the model confirms the presence of a significantly positive long-run price asymmetry for butter, buttercream, sour cream, and Trappista cheese. The positive long-run price transmission asymmetry results could be explained by the strong market power of milk processors, which are granted through their concentrations and the absence of competitiveness in the market. The short-run asymmetry of price transmission could be explained by implementing some policy interventions, such as the milk quotas, which limit milk production. Analyzing the asymmetric relationship between the producer milk price and the retailer dairy product prices could give a clear vision of the dairy sector and how prices move between market actors, highlighting the retailers’ purchasing power feature, and its role in determining the market price interaction.

Keywords: dairy sector; asymmetric transmission; NARDL; Hungary (search for similar items in EconPapers)
JEL-codes: Q1 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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