Spatial Price Transmission of Milk Prices Among the Visegrad Countries

Lucia Vargova, Miroslava Rajcaniova

When trading with homogenous goods, consumers are not able to distinguish between individual goods and thus not willing to pay a higher
price, if the same product is available for lower price. This leads to an interesting effect, when prices of homogenous goods in different locations
in an open market tend to get closer. It is the result of the so-called Law of One Price. Because of the Law of One Price, producers are affected not
only by vertical price transmission, but also horizontally. The aim of this paper is to assess the linkage and patterns among the prices of cow’s raw
milk in the V4 countries. We apply the price transmission methodology, such as unit root tests, cointegration tests, error correction models, and
Granger causality tests. Monthly data for producer prices of raw milk are used, covering the period from January 2005 to June 2017. Our results
confirm the existence of the Law of One Price when milk producer prices in different locations are co-integrated.

Keywords: 
spatial price transmission; cointegration; milk production
Contact: 

Lucia Vargova, Slovak University of Agriculture in Nitra, Faculty of Economics and Management, Tr. Andreja Hlinku 2, 949 76, Slovakia

Date of online publishing: 
18.11.2017

President
Dr.h.c. Prof. Ing. Peter Bielik, PhD.
e-mail: Peter.Bielik@uniag.sk
tel: +421376415518

Liaison Officer
Prof. Dr. Ing. Elena Horská
e-mail: Elena.Horska@gmail.com
tel: +421376415522

Secretary General
Mgr. Vladislav Valach
e-mail: Vladislav.Valach@uniag.sk
tel: +421376415545
 

Postal address

Slovak University of Agriculture in Nitra                                                        
Visegrad University Association
Foreign Relations and International Programmes Office
Tr. Andreja Hlinku 2
949 76  Nitra
Slovakia