The Threshold Cointegration and Asymmetric price Transmission: Application for Beef Market in East Azerbaijan Province

Asymmetric price transmission has influence on the welfare of producers and consumers with increasing market margin and it reduces the marketing efficiency. APT is of considerable importance because it could have important, policy and economic implications. This study considered the price transmission mechanism between farm and retail levels of beef market in East Azerbaijan with weekly prices over Farvardin 1377 to Esfand 1390. In this context, threshold cointegration approach is used. The results of Sup-F and Lo and Sup-LR indicated that there is non-linear cointegration relationship between two levels of prices. The model specification for univariate and TVAR models was carried out by the Sup-F’ and the Sup-LR’ test, respectively. The result showed that the two regimes model was proper. The result of two- regime TAR and M-TAR indicated that the adjustments have threshold behavior and the retail prices response to the positive shocks more quickly than the negative. The results of TVAR model also demonstrated that the price transmission mechanism has threshold behavior and indicated that farm prices are influenced by changes in retail prices. With the comprehensive review of the relationship between the farm and retail prices, the advantage of using the multivariate models confirmed. Since it seems that non-competitive market structures is as cause for asymmetry in this market its suggested that the bargaining power be increased with supportive policy. Also make agricultural marketing cooperatives which consists the farmers could be the right solution for this problem.