Farm Production Costs, Producer Prices and Retail Food Prices in Greece: A Cointegration Analysis


The relationship between farm production costs, producer prices and retail food prices has been quite often the subject of research. This study examines the existence of cointegrating relationships and the direction of causality between these variables in Greece. The data used refer to price indices of farm inputs and outputs for crop and livestock production and retail price indices for food and non-alcoholic beverages. The stationarity of the time series is examined using the alternative econometric tests of the literature. The Johansen procedure verifies the existence of a long run equilibrium relationship. Both, the Maximum Eigenvalue test and the Trace test confirm the existence of one only cointegrating relationship. Alternative formulations of the linear long run equilibrium relationship are examined within the Johansen context and the short and long run causality directions are investigated. It is found that in the short and long run, production costs and producer prices “influence” retail food prices. In addition to the estimated cointegrating relationship, the estimated Vector Error Correction Model provides information on the speed and adjustment process towards the long run equilibrium.

Volume :- No.9 (2015)

Issue No :- 2 (2015)

Pages :- 127-143

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