Asymmetric Price Transmission and Non-linear Adjustment in the Iranian Mutton Market
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This paper analyses the asymmetric price transmission and non-linear adjustment at the farm
and retail levels in the Iran’s mutton market. We applied a multivariate threshold error correction
mechanism for monthly price data. We tested the non-linear adjustment using sup-LR, sup-LM
and sup-Wald tests. The results confirm the presence of non-linear cointegration relationship
between the retail and farm prices. In short-run, the price transmission behavior reveals that
reactions of both the retail and farm prices to positive and negative deviations from the long-run
price spread are asymmetric. More specially, the retailers show more strong responses to the both
positive and negative shocks imposed to the farmers.