A comparison of the different approaches to detecting asymmetry in retail-whole sale price transmission

Abstract

The purpose of the study is to investigate whether the price transmission between the retail and wholesale maize prices is asymmetric in Ghana. Houck’s static model and the von Cramon-Taubadel and Loy Error Correction Model (ECM) were applied to test for asymmetry whilst the Houck’s static model fails to support this conclusion in the same market with the same data. The F-test associated with the null hypothesis that retail prices respond symmetrically to increases and decreases in wholesale prices is not rejected in the case of Houck’s static model. In contrast, the hypothesis of symmetry is rejected in the ECM approach. These results suggest that different models may lead to different conclusions in asymmetric price transmission modelling.