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Econometric Models of Asymmetric Price Transmission


Matteo Manera


University of Milan-Bicocca, Italy - Department of Economics, Quantitative Methods and Business Strategies (DEMS); Fondazione Eni Enrico Mattei (FEE), Milan, Italy; Università degli Studi di Milano-Bicocca - Department of Economics, Quantitative Methods and Business Strategies (DEMS)

Giliola Frey


Fondazione Eni Enrico Mattei (FEEM)

September 2005

FEEM Working Paper No. 100.05

Abstract:     
In this paper we review the existing empirical literature on price asymmetries in commodities, providing a way to classify and compare different studies which are highly heterogeneous in terms of econometric models, type of asymmetries and empirical findings. Relative to the previous literature, this paper is novel in several respects. First, it presents a detailed and updated survey of the existing empirical contributions on the existence of price asymmetries in the transmission mechanism linking input prices to output prices. Second, this paper presents an extension of the traditional distinction between long-run and short-run asymmetries to new categories of asymmetries, such as: contemporaneous impact, distributed lag effect, cumulated impact, reaction time, equilibrium and momentum equilibrium adjustment path, regime effect, regime equilibrium adjustment path. Third, each empirical study is critically discussed in the light of this new classification of asymmetries. Fourth, this paper evaluates the relative merits of the most popular econometric models for price asymmetries, namely autoregressive distributed lags, partial adjustments, error correction models, regime switching and vector autoregressive models.

Number of Pages in PDF File: 85

Keywords: Price asymmetries, Cointegration, Partial adjustment, Threshold regime switching

JEL Classification: C22, D40, Q40

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Date posted: November 9, 2005  

Suggested Citation

Manera, Matteo and Frey, Giliola, Econometric Models of Asymmetric Price Transmission (September 2005). FEEM Working Paper No. 100.05. Available at SSRN: http://ssrn.com/abstract=843504 or http://dx.doi.org/10.2139/ssrn.843504

Contact Information

Matteo Manera (Contact Author)
University of Milan-Bicocca, Italy - Department of Economics, Quantitative Methods and Business Strategies (DEMS) ( email )
Via Bicocca degli Arcimboldi, 8
Milan, 20126
Italy
+39 02 6448 5819 (Phone)
+39 02 6448 5878 (Fax)
HOME PAGE: http://www.matteomanera.it
Fondazione Eni Enrico Mattei (FEE), Milan, Italy ( email )
Corso Magenta, 63
Milan, 20123
Italy
+39 02 520 36944 (Phone)
HOME PAGE: http://www.feem.it
University of Milan, Bicocca - Department of Economics, Quantitative Methods and Business Strategies (DEMS) ( email )
Piazza dell'Ateneo Nuovo, 1
Milan, 20126
Italy

Giliola Frey
Fondazione Eni Enrico Mattei (FEEM) ( email )
C.so Magenta 63
Milano, 20123
Italy
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