Vertical price transmission analysis along the cheese supply chain

Abstract

Purpose: this paper investigates vertical price transmission along the cheese supply chain in the Russian market. Discussion: monthly farm-gate and retail prices in Russiacovering the period from 2003 to 2014 were used in the analysis. Prices were expressed in natural logarithms to calculate percentage change. Vertical price transmission was evaluated in the cointegration framework, using classical Engle-Granger approach. Results: We concluded that all price variables are integrated of the order one, I(1).Using cointegration technique, we find no empirical evidence for cointegration between farm-gate and retail prices. We show that there is unidirectional Granger causality from farm to retail prices. We built autoregressive distributed lags (ARDL) model and have estimated effects of change in farm prices on change in retail price for cheese.