Vertical price transmission in the Turkish poultry market: the avian influenza crisis

This article assesses the impact of the Avian Influenza (AI) outbreak in the Turkish poultry market by focusing on price transmission at producer and retail levels. The relationship and patterns of transmission between producer and retail prices are analysed by estimating a Regime-Switching Vector Error Correction Model with three regimes. An AI information index variable is developed and used to determine regime-switching. Results suggest that consumer prices adjust to disequilibrium caused by the AI crisis, while producer prices are sticky and slowly responsive.