Static versus dynamic model for estimating asymmetric price transmission in the Ghanaian maize market

Abstract

A conventional approach to analyzing asymmetric price transmission involves the use of the Houck's static model. This paper compares this time invariant approach to a dynamic variant of the model. The static model is a standard regression type model where parameters are assumed fixed over time, whereas the more flexible dynamic Houck's model allows parameters to vary over time. The flexibility of the dynamic modeling revealed the existence of price asymmetry in the Ghanaian maize market. This result was not supported by the Houck's static model. The results suggest that within the price transmission modeling framework, static and dynamic variants of the same approach may lead to differences in conclusion. © 2011 Academic Journals.