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Journal of Agricultural & Food Industrial Organization

Ed. by Azzam, Azzeddine

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(A)symmetry, (Non)linearity and Hysteresis of Pricing-To-Market: Evidence from German Sugar Confectionery Exports

Svetlana Fedoseeva
  • Corresponding author
  • Center for International Development and Environmental Research (ZEU), Justus Liebig University, Senckenbergstrasse 3, 35390 Giessen, Germany
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Published Online: 2013-05-22 | DOI: https://doi.org/10.1515/jafio-2013-0003

Abstract: Pricing-to-market (PTM) is often reported to be adopted by exporters, who have invested in their presence on international markets and are interested in keeping and developing their market shares. Then, a markup adjustment is used to partially offset changes of the exchange rate, which are unfavorable for their foreign customers, in order to keep the price level in the importer’s currency relatively unchanged. With only few exceptions, empirical literature often considers PTM adjustments to be linear and symmetric. If asymmetry is allowed, PTM is often regarded as contemporaneous, which is a very simplifying assumption, given the goals pursued by exporters employing PTM strategies. This paper applies the dynamic autoregressive distributed lag (ADRL) approach popularized by Pesaran, Shin, and Smith (2001) and its nonlinear extension by Shin, Yu, and Greenwood-Nimmo (2011) to the data of German sugar confectionery exports to various destination markets. It turns out that in the long-run PTM is neither linear nor symmetric.

Keywords: pricing-to-market; asymmetric cointegration; nonlinear ARDL model; sugar confectionery

JEL codes: F14; L11; L66


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About the article

Published Online: 2013-05-22

Confectionery refers to chocolate, sugar confectionery and gum products (BMI 2010).

BMI (2010) reports the confectionery sector to be only fifth with 4.5% of total food and drink industry production, after meat and poultry processing (26%), dairy industry (13%), bread and baked goods (11%) and alcoholic beverages (7.8%).

Sugar confectionery includes hard boiled sweets, mints, jellies and medicated sweets (BMI 2010).

See Knetter (1989) for the details of the derivation.

The choice of thresholds is explained in Section 5.

Detailed outcome of this estimation can be obtained from the author by request.

Citation Information: Journal of Agricultural & Food Industrial Organization, Volume 11, Issue 1, Pages 69–85, ISSN (Online) 1542-0485, ISSN (Print) 2194-5896, DOI: https://doi.org/10.1515/jafio-2013-0003.

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