STATISTICAL-ANALYSIS OF PRICE TRANSMISSION IN THE EUROPEAN UNION

The three-step estimator of the co-integrated system approach is used to examine the dynamic transmission of agricultural producer prices th rough the food marketing system in seven countries of the EU. The resu lts suggest that even if producer and consumer prices drift apart in t he short-run, for example when producer price policy changes, market f orces return them to their long-run equilibrium. Tests do not reject t he hypothesis of long-run 'perfect' price transmission for two, pigmea t-pigs and butter-milk, out of five pairs of prices, in six of the sev en member countries of the EU considered here, the UK being the except ion. The tests do, however, reject the hypothesis of short-run 'perfec t' price transmission, even in its less restrictive form, across all p airs of prices in all countries.