International price of commodities like wheat, rice, or maize decreased in 2015. It is expected that domestic consumer price of food items follow this decrease. However, there are many factors that can hinder price transmission from international markets.
This study investigates how prices are transmitted from international (Black Sea) wheat market to domestic (Georgia) flour market. We used the Vector Error Correction Model (VECM) to measure the price transmission.
The results show that one percentage point increase in Black Sea wheat price lead to the corresponding 0.72 percentage increase in flour price in Georgia. The analyses also show that 4 months is needed to correct more than half of the deviations and 7 months to fully adjust.
|Since September, 2014, the ISET Policy Institute has been working with the German Economic Team (GET). In May,2015 ISET-PI and GET extended their partnership and began working on a variety of policy briefs for Georgia's industrial development. These briefs will simultaneously advance research in the sector and provide the Georgian government a set of guidelines for the development of its own policy, exploring where Georgia's comparative advantages lie. The German Economic Team is a consulting group who provides advisory services to the Georgian government on economic policy and is supported by the German Federal Ministry for Economic Affairs and Energy.|