Price volatility transmission of perishable agricultural products: evidence from China

Zheng Pan and Xuyun Zheng

Economic Research-Ekonomska Istraživanja, 2023, vol. 36, issue 1, 2180058

Abstract: Volatility transmission is a crucial price phenomenon that influences upstream production and downstream consumption in agricultural commodity markets. However, existing studies offer little evidence on how product perishability is related to price volatility transmission along the agricultural market chain. This study investigates how price volatilities are transmitted across the farm, wholesale, and retail stages using high-frequency data from litchi and apple markets in China. We adopt various MGARCH models and volatility impulse response functions to evaluate the time evolution of price volatility correlation, and the direction and magnitude of price volatility transmission. Empirical results indicate that in the litchi market chain, the wholesale stage plays a dominant role in price volatility transmission, and the wholesale and retail stages have higher volatility spillover effects on the farm stage than vice versa. However, we find little evidence of price volatility transmission along the apple market chain. Our findings suggest that the degree of price volatility transmission is stronger for higher product perishability.

Date: 2023
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DOI: 10.1080/1331677X.2023.2180058

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