Price transmission: the case of the UK dairy market

Rose, R. and Paparas, D. (2023) Price transmission: the case of the UK dairy market. Commodities, 2 (1). pp. 73-93. ISSN 2813-2432

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The UK milk market has faced major economic difficulties over the last 20 years, seeing the smallest milk producers exit the industry. The key objective of this study is to examine price transmission within the UK milk market to understand the market’s efficiency and influences. An Augmented Dickey–Fuller unit root test identified all the examined series were stationary at the first difference. A modified Dickey–Fuller test allows for levels and trends that differ across a single break date and Bai–Perron test identified multiple structural breaks, including January 2012, July 2015, and November 2017. The Johansen cointegration test identified one cointegrating factor. The Error Correction Model results identified that prices would regain equilibrium at 14%, roughly 7 months after a price shock. Granger Causality identified the producer to granger cause retailer prices. The Threshold Autoregressive model suggests the dataset is symmetric. Econometric research into the UK’s liquid milk market is limited. As such, this study will provide an understanding as to whether current econometric policies are working, alongside the potential to aid the improvement or development of new policies while the UK exits the EU. Additionally, this study includes structural breaks as previous studies have failed to do so, which has led to a mixture of results.

Item Type: Article
Keywords: price transmission, asymmetry, causality, dairy
Divisions: Food, Land and Agribusiness Management
Depositing User: Mrs Rachael Giles
Date Deposited: 02 May 2023 13:13
Last Modified: 02 May 2023 13:13

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