TESTING FOR PRICE TRANSMISSION WITH SEASONALLY INTEGRATED PRODUCER AND CONSUMER PRICE SERIES FROM AGRICULTURE

This paper attempts to examine the possible consequences of the presen ce of seasonal integration on the statistical tests such as those for integration and cointegration on prices of agricultural products, with reference to price transmission of seven EU member countries. Quarter ly producer and consumer price series are tested using the methodology presented in Hylleberg et al. (1990). It is found that the hypothesis that some series for soft wheat and milk contain seasonal unit roots cannot be rejected. Standard tests for integration and cointegration w hich have been applied ignore these seasonal components and are thus f ound to lack consistency and power. It is also shown that when using f ilters as a solution, failure to use precisely the correct seasonal fi lter may also distort results.