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Abstract

Increasing attention has been given to raising commodity prices due to its negative effects on poverty and undernutrition. An example of this problem are the growing rice prices in Philippines, which are causing high living expenses to the population across the country. To assess the competitiveness of agro-food chains, price transmission has been used as an indicator of market integration. Using monthly data for the period 2000 to 2016, this study tests vertical price transmission between wholesale and retail prices and dynamic relationship between them in five local markets in Philippines. Results demonstrate that retail prices are granger caused by wholesale prices in all local markets. An autoregressive distributed lag (ARDL) model confirms that asymmetry in rice price transmission between wholesale and retail levels in Metro Manila and Davao. In addition, the ARDL model also confirms retail rice prices in all markets studied in Philippines depend on previous retail prices, contemporaneous wholesale prices and wholesale prices lagged one and two periods, depending on the location. Impulse Response Functions (IRFs) show the retail price response initiates almost immediately or at most one month later after shock, i.e. negative and positive change, on wholesale price, and the duration of full price adjustments tend to be considerably longer in all five local markets in Philippines.

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