Spatial Price Transmission of Saffron in Iran

Spatial price transmission is interpreted to assess the degree of convergence of markets and reduce functional impairment of markets and transaction costs. Because of the importance of saffron as a major agricultural export and concentration of producers in Khorasan province and distribution of consumers throughout the country، the objective of this study is to investigate the spatial transmission of saffron price in various provinces of Iran. Data of monthly retail prices of saffron for 2006-2012 and threshold error correction model were used to estimate price spatial transmission patterns between Khorasan and other provinces in the country. Results of the study revealed that there was a positive price asymmetry among most of provinces. Price transmission coefficients showed that in the short term، price reduction at the retail level are transmitted faster to other markets compare to price increment. In the long term، deviations from equilibrium moderated and markets were converging. Efforts to improve conditions for producers through establishment of cooperatives، and strengthening the role of commodity exchange market to increase farmers bargaining power and lowering the role of brokers in the market seems to be necessary.