Vertical Price Transmission between Wheat and Flour in Ukraine: A Markov-Switching Vector Error Correction Approach

Bernhard Brümmer, Stephan von Cramon-Taubadel and Sergiy Zorya

No 25575, 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia from International Association of Agricultural Economists

Abstract: The analysis of price transmission in transition countries is complicated by their often unstable policy environments. We utilise a Markov-switching vector error correction model (MSVECM) to allow for multiple regime shifts in the price relationship between wheat and wheat flour in Ukraine from June 2000 to November 2004. The analysis reveals four regimes. The observed temporal pattern of these regimes corresponds well to political and economic events in Ukraine. In particular, we find a strong link between a 'high uncertainty' regime and discretionary policy interventions in 2003, confirming that ad hoc policy responses to fluctuations in Ukrainian grain harvests have tended to increase rather than reduce instability. The Markov-switching VECM is shown to be a useful addition to the set of tools that can be used to analyse price transmission.

Keywords: Industrial; Organization (search for similar items in EconPapers)
Pages: 23
Date: 2006
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae06:25575

DOI: 10.22004/ag.econ.25575

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