Disentangling supply and demand shifts: the impacts on world salmon price

Eivind Hestvik Brækkan

Applied Economics, 2014, vol. 46, issue 32, 3942-3953

Abstract: To understand price changes, one must determine the relative impact of supply and demand shifts on price. Conditional on predetermined supply and demand elasticities, we retrieve yearly shifts in regional supply and demand. The relative impact on price from each supply and demand shift is determined through an equilibrium displacement model (EDM). This procedure is applied on a yearly basis for the world salmon market in the period 2002 to 2011. The results indicate a large variation in demand and supply growth both over time and between regions. While average annual price impacts from supply or demand shifts from most regions are not statistically significant, price impacts from supply or demand shifts for specific periods are detected in all but one region. This indicates that the use of smooth trend indicators is likely to be inappropriate for measuring supply and demand shifts and their impacts on price. The procedure presented in this article can be a useful instrument for determining the relative impacts of supply and demand shifts on price in any market with unstable price behaviour.

Date: 2014
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DOI: 10.1080/00036846.2014.948674

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