The Research On Asymmetry Of Vertical Price Transmission In China's Grain Market

Food is the basis of people's survival and development,and ensuring food security is an important cornerstone of maintaining national stability and social harmony.The 2021 "Government Work Report" pointed out: "Solving the problem of food is always the top priority.We must work hard and have the ability to ensure food security for the 1.4 billion people." Grain price is the "barometer" that reflects the situation of grain market.The fluctuation of grain price is related to grain production and supply,and affects the national food security.At present,under the impact of COVID-19 epidemic and the implementation of the new round of stimulus plan in the United States,global inflation is increasing,food prices are soaring,and the global food crisis is approaching.Under this background,studying the vertical price transmission mechanism and asymmetric price transmission effects in China's grain market can further improve and expand the research on asymmetric price transmission,and also help to correctly grasp the grain market operation rule and find out the problems existing in the current operation mechanism of China's grain market.This can provide theoretical reference and empirical support for grain price control policies and risk prevention,and also provide policy reference for promoting the vertical integration of China's grain market,stabilizing domestic grain prices and ensuring national food security.Therefore,the research of this paper has important theoretical and practical significance.Throughout the existing research,there are still few studies on the vertical asymmetric price transmission in China's grain market,and the research methods are relatively backward.Existing studies have mainly investigated the price transmission between the upstream and downstream subsystems,but there is a lack of research on the asymmetric transmission among the farm price,wholesale price and retail price in grain market.China's grain market has its own particularity,which needs to be deeply analyzed and investigated.Therefore,on the basis of theoretical analysis,this paper uses the newly developed nonlinear methods to investigate the asymmetric transmission effects among farm price,wholesale price and retail price in China's grain market from three aspects of direction asymmetry,regime asymmetry and volatility asymmetry.The main work and results of this paper are as follows:Firstly,based on the existing research,this paper systematically expounds the theory of asymmetric price transmission,and specifically analyzes the reasons for the possible asymmetry of vertical price transmission in grain market from the aspects of market power,consumer search and consumption inertia,government intervention and transaction cost.The analysis shows that,theoretically,market power may lead to the direction asymmetry of the vertical price transmission in grain market.The theories of consumer search and consumption inertia mainly explain the "positive asymmetry" in the transmission from wholesale price to retail price.The government's policy intervention in grain market may lead to the direction asymmetry or regime asymmetry in vertical price transmission.The existence of transaction cost will lead to the regime asymmetry of the vertical price transmission in grain market.Secondly,this paper uses the NARDL model to investigate the directional asymmetry of vertical price transmission in China's grain market from both long-run and short-run perspectives,and analyzes the long-run asymmetric transmission effects and short-run asymmetric transmission effects among the farm price,wholesale price and retail price when prices rise and fall.The results indicate the presence of asymmetry in the long-run or in the short-run in the vertical price transmission of China's grain market.In general,the forward price transmission presents "positive asymmetry",and the reverse price transmission presents "negative asymmetry".However,in the transmission between wholesale price and retail price in the corn market,the results are the opposite.This article argues that the underlying reasons for this asymmetric price transmission phenomenon are government intervention and market power.The implementation of China's grain price support policy and the disproportionate market power among economic entities in the vertical chain of grain market will lead to asymmetric transmission among farm price,wholesale price and retail price in grain market.In general,retailers have stronger market power,and wholesalers and farmers are more likely to be price takers.However,for the corn market,in recent years,there has been a situation of oversupply,which makes the retail market of corn lack of price power.Thirdly,this article applies the three-regime TVECM estimated by the regularized Bayesian estimator to measure the degree of vertical integration in China's grain market from the perspective of transaction costs,and analyzes the asymmetry of vertical price transmission when prices deviate from equilibrium by different degrees.The results show that the regularized Bayesian estimation results are more consistent with the market integration theory than the profile likelihood estimation results.The farm-wholesale market integration is greater than the wholesale-retail market integration,and the vertical integration of soybean and maize markets are poorer than the vertical integration of rice and wheat markets.The vertical price transmission in China's grain market is asymmetric in different regimes.The reason is that the implementation of price support policy and the increase of price support level distort the balance of supply and demand in the domestic grain market,thus affecting the benign price transmission in the vertical supply chain of grain market,and hindering the vertical integration of grain market.In addition,price transmission may also occur when the degree of the price deviation from equilibrium is lower than transaction costs,which means that there is an information transmission mechanism in the vertical price transmission of China's grain market.Finally,taking the level of grain market volatility as the threshold variable,this paper employs the TVAR model to investigate the asymmetry of the vertical price transmission in China's grain market and the asymmetry of the transmission from international to domestic grain prices from the perspective of market volatility.The results suggest that there is obvious asymmetry in the price transmission when grain market is in the state of low and high volatility.In most of the estimation results,the price transmission effects in a high volatility state are greater than that in a low volatility state.But,in the partial estimation results of wheat and corn markets,the opposite is true.There are two reasons for this asymmetry in the price transmission.On the one hand,due to the information transmission mechanism between prices,the price transmission effects are usually greater in a high volatility state.On the other hand,high market volatility means high market uncertainty.Generally speaking,when there is high uncertainty,people become more sensitive to the changes of external shocks,and changes in grain prices at this time will cause greater reaction of grain market participants,so the price transmission effects in a high volatility state are greater.In recent years,however,corn and wheat inventory backlog serious in China,there will not be a market panic.When there is high uncertainty,in the face of external shocks,market participants will become more cautious and will not easily adjust prices,therefore,the price transmission effects in a high volatility state may be smaller in the corn and wheat markets.Based on the above theoretical and empirical research results,this article believes that China should continue to promote the reform of grain marketization,and unblock all links in grain production,purchase,storage,processing and marketing,accelerate the upgrading and high-quality development of the grain industry,improve the information transmission mechanism of the grain prices,and construct the national food security strategy from a global perspective,so as to promote the vertical integration of China's grain market,stabilize domestic grain prices,and ensure national food security.