Asymmetric price transmission in the food sector: Comparative country samples

The sudden rise in food prices along with the food crises experienced in 2007 and 2008 led to the attention of the public, especially the policy makers, towards food prices. In the effectively functioning markets, these movements are expected to be conveyed fully up and down along the food supply chain. However, due to the disruptions caused by the market, the situations in which the transmission mechanism works imperfectly have become a common occurrence. The aim of this study is to investigate the existence of such an imperfect price transmission mechanism in food markets of the selected countries between January 2000 and January 2018. For this purpose, the transmission mechanism between producer and consumer prices in the food sector is analyzed using non-linear autoregressive distributed lag models (NARDL). This analysis method corresponds to the contribution of this study to the literature. This is the first study carried out for the food markets in terms of the method used. The method used here allows to analyze the asymmetric price transmission mechanism in both long and short run. In addition, it is possible to incorporate series that are integrated of different orders into the analysis also in nonlinear models. The results of the study also contribute to the literature. According to the results of this study, asymmetric price transmission is not a market anomaly but it is found to be a common situation in the market. In terms of consumer welfare, the presence of asymmetry will damage the low-income people most. It is noteworthy that the results of this study are consistent with this proposition.