INSTITUTIONS AND PRICE TRANSMISSION IN THE VIETNAMESE HOG MARKET

The Vietnamese Hog Market

Table 3. Results of the Augmented Dickey Fuller test for DP_p and DP_r in
the North

Critical Values of the Test

Note: ** 5 significant at 1%.

coefficient for changes in the current price in Ha Noi is larger than one. Therefore,
retail prices react to an extent beyond the shocks occurring at the production level.
It seems that adjustments occur within the week, and data of a higher frequency
would be necessary to examine the process of price transmission more precisely.
And third the significance of the coefficients differs for increases and decreases in
production prices. Only contemporaneous coefficients for increases in production
price (PPP_t) are significant, whereas coefficients for decreases of production price
are significant for both contemporaneous (NPP_t) and lagged prices (NPP_t-1,
NPP_t-2). This suggests that retail prices react more rapidly when the margin is
squeezed than when it is stretched. Those results are corroborated by the test of
the two-asymmetry hypothesis. The F;test of the first hypothesis indicates that
the total impacts of production price increases and decreases on retail price
changes are different. The F statistics of the second hypothesis indicate that the
retail price response to price increases differs from that of price decreases at the
production level. Empirical results therefore demonstrate that price transmission
between the production and the retail levels of the hog market in the North of
Vietnam are asymmetric.

Price Transmission and Symmetry in the South

Equation (3) is first estimated with P_r as the dependent variable³, with six
lagged differences for both P_p and P_r and then reduced to the most parsimonious
model corrected for both auto-correlation and partial auto-correlation of the
residuals. Results of the estimation are presented in Table 7. Following Boswijk
and Urbain (1997), we test for weak exogeneity with respect to the long-run
parameter by adding the estimated segmented error correction term to (4). Results
in Table 8 show that we fail to reject the null hypothesis of weak exogeneity with
respect to the long-run parameters for the producer price. Then a variable addition
is used to test the significance of ^_t, the residuals from the marginal model (4), in

Table 4. Results of the Granger causality test between DP_p and DP_r

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