Asymmetric price transmission in the brazilian refined sugar market

Abstract

This work evaluates the price relations and transmission patterns between producers and retail in the market for refined sugar in Sao Paulo, Brazil, its direction and magnitude. The results suggest that the transmission of shocks is bidirectional. Formal tests suggest that the symmetry in price transmission from retail to producer cannot be rejected in short and long-run. Therefore, positive and negative exogenous shocks of refined sugar at the retail impact producer’s prices in the same magnitude. From producer to retail prices, the tests confirmed a negative asymmetry in price transmission. It means that a reduction in producer prices has a stronger impact in reducing retail prices than when a positive shock on producer prices is transmitted to increase retail prices.