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1991•RePEc: Research Papers in EconomicsOpen access

Dynamics and Price Volatility in Farm-Retail Livestock Price Relationships

T. Kesavan, Satheesh V. Aradhyula, T. Kesavan, Aradhyula, Satheesh

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Abstract

This study uses an error correction model (ECM) to investigate dynamics in farm-retail price relationships. The ECM is a more general method of incorporating dynamics and the long-run, steady-state relationships between farm and retail prices than has been used to data. Monthly data for beef and pork are used to test the time-series properties for the ECM specification. The model is extended to study price volatility through the generalized autoregressive conditional heteroskedasticity (GARCH) process. Accommodation of the GARCH process provides a useful way of analyzing both mean and variance effects of policy or market structure changes.

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What this paper is about

This study uses an error correction model (ECM) to investigate dynamics in farm-retail price relationships. The ECM is a more general method of incorporating dynamics and the long-run, steady-state relationships between farm and retail prices than has been used to data. Monthly data for beef and pork are used to test the time-series properties for the ECM specification. The model is extended to study price volatility through the generalized autoregressive conditional heteroskedasticity (GARCH) process. Accommodation of the GARCH process provides a useful way of analyzing both mean and variance effects of policy or market structure changes.

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Available abstract

This study uses an error correction model (ECM) to investigate dynamics in farm-retail price relationships. The ECM is a more general method of incorporating dynamics and the long-run, steady-state relationships between farm and retail prices than has been used to data. Monthly data for beef and pork are used to test the time-series properties for the ECM specification. The model is extended to study price volatility through the generalized autoregressive conditional heteroskedasticity (GARCH) process. Accommodation of the GARCH process provides a useful way of analyzing both mean and variance effects of policy or market structure changes.

Key concepts: Autoregressive conditional heteroskedasticity, Volatility (finance), Econometrics, Heteroscedasticity, Autoregressive model, Economics, Conditional variance, Time series

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