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Abstract
This paper assesses the linkages among farm, wholesale and retail markets along the
U.S. pork supply chain by analyzing their price transmissions and volatility spillovers.
Data used in the analysis include monthly farm, wholesale and retail price for pork,
covering the period of January 2000 through December 2014. Engle and Grager’s
cointegration technique was adopted to examine long run price relationships for each
pair of markets, while an asymmetric VAR-BEKK-GARCH model was followed to
investigate whether asymmetry plays a role in short-run price adjustments and
volatility spillovers.
Key findings of this study include: (1) the presence of long-run relationship in all
three pairs of markets; (2) asymmetric short-run price adjustments in retail and farm
markets; (3) asymmetry in wholesale price volatility, wholesale price will be more
volatile when confront with positive shocks; (4) bi-directional volatility spillovers in
all three pairs of markets; and (5) asymmetric spillover effects to wholesale and farm
markets, with price instabilities being more sensitive to the joint shocks that move in
different directions.