Analysis of Price Transmission using a Nonparametric Error Correction Model with Time-Varying Cointegration

Several authors have proposed using non-parametric methods to estimate price transmission rather than the currently popular piecewise linear or regimedependent methods. However, so far only the error correction mechanism has been estimated non-parametrically using local polynomial techniques. We propose a new method for estimating price transmission relationships that combines a nonparametric error correction model with time-varying cointegration. Two applications, to wheat price transmission between Ukraine and France, and to vertical transmission between piglet and slaughter pig prices, are presented to demonstrate the complex behaviour and insights that the proposed method can reveal.

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Conference Paper/ Presentation
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JEL Codes:
Q11; Q13; C5; C22

 Record created 2017-04-01, last modified 2019-08-30

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