Horizontal Price Transmission on the Russian Dairy Market: Nonlinear Approach

Sergei Kharin

DOI 10.7160/aol.2019.110305
No 3/2019, September
pp. 45-54

Kharin, S. (2019) “Horizontal Price Transmission on the Russian Dairy Market: Nonlinear Approach", AGRIS on-line Papers in Economics and Informatics, Vol. 11, No. 3, pp. 45-54. ISSN 1804-1930. DOI 10.7160/aol.2019.110305.

Abstract

Spatial (horizontal) price transmission analysis provides specific evidence as to the competitiveness of markets, the effectiveness of arbitrage and the pricing efficiency. The paper investigates spatial price transmission and market integration in the Russian Federal Districts using monthly milk prices within the period 2000-2018. Using Hansen-Seo technique, threshold effects have been found and threshold vector error correction model with two regimes has been estimated for three markets. Market integration analysis revealed a long-run relationship for all the price pairs in the milk markets. The linear VECM analysis showed a rather low degree of integration, especially for the Southern Federal District milk market. Compared to VECM, the TVECM estimation provided different findings depending on regimes and markets.

Keywords

Spatial price transmission, market integration, Threshold Vector Error Correction model, milk market, Russia.

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