Empirical Detection and Quantification of Price Transmission in Endogenously Unstable Markets: The Case of the Global–Domestic Coffee Supply Chain in Papua New Guinea

Ray Huffaker, Garry Griffith, Charles Dambui and Maurizio Canavari
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Ray Huffaker: Department of Agricultural and Biological Engineering, University of Florida, Gainesville, FL 32611, USA
Garry Griffith: UNE Business School, University of New England, Armidale, NSW 2350, Australia
Charles Dambui: Coffee Industry Corporation Ltd., Goroka 441, Eastern Highlands, Papua New Guinea

Sustainability, 2021, vol. 13, issue 16, 1-18

Abstract: Price transmission through global–domestic agricultural supply chains is a fundamental indicator of domestic market efficiency and producer welfare. Conventional price-transmission econometrics test for a theory-based spatial-arbitrage restriction that long-run equilibrium prices in spatially distinct markets differ by no more than transaction costs. The conventional approach is ill-equipped to test for price transmission when endogenously unstable markets do not equilibrate due to systematic arbitrage-frustrating frictions including financial and institutional transaction costs and biophysical constraints. We propose a novel empirical framework using price data to test for market stability and price transmission along international-domestic supply chains incorporating nonlinear time series analysis and recently emerging causal-detection methods from empirical nonlinear dynamics. We apply the framework to map-out and quantify price transmission through the global-exporter–processor–producer coffee supply chain in Papua, New Guinea. We find empirical evidence of upstream price transmission from the global market to domestic exporters and processors, but not through to producers.

Keywords: market instability; nonlinear empirical dynamics (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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