Do inventories have an impact on price transmission? Evidence from the Canadian chicken industry

Abdessalem Abbassi, Lota Tamini and Jean-Philippe Gervais ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the influence of inventories in explaining the magnitude of price transmission. The empirical strategy consists of two distinct steps. First, the flexible non-linear framework of Hamilton is used to investigate the influence of inventories on price transmission. The procedure detects significant non-linearities and suggests that the price transmission elasticity is increasing in the level of the farm price and decreasing in the ratio of inventories to sales. This evidence leads to specific functional forms for the price transmission and target inventory equations which are estimated in a second step. The estimation procedure accounts for potential simultaneity between sales at the wholesale level and the wholesale price. Our results suggest that price transmission is lower (higher) when inventories are below (above) a target which is function of domestic sales.

Keywords: Asymmetric price transmission; inventories (search for similar items in EconPapers)
JEL-codes: C30 L16 (search for similar items in EconPapers)
Date: 2011-01-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Do Inventories Have an Impact on Price Transmission? Evidence From the Canadian Chicken Industry (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:30868

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