Asymmetric Price Transmission and Structural Breaks in the Relationship between Costa Rican Markets of Livestock Cattle,Beef and Milk

The vertical price transmission is generally considered as the relationship between two markets of the same production chain However, we can expand this concept to another relation which has not been deeply investigated： the joint products. They are the products which are produced in a single production process, but not correspond to the same chain. An especial case is the beef and milk markets in Costa Rica. Even if these products usually correspond to disconnect chains, in Costa Rica farms make use of cattle to produce both meat and milk. The cointegration framework is applied in order to indentify the price transmission among these markets. In addition, the asymmetric behavior and structural breaks are taken into account. Price transmission between each market pair was found. First, the cattle prices adjust in the milk-cattle relationship, second, beef meat prices adjust in the cattle-beef meat and in the milk - beef meat relationship. Finally, the equations allowing for structural breaks affect the estimates in the following three ways： after the break the elasticities became higher than 1, there is more evidence of cointegration, and the adjustment coefficients are significant only when a change in the long run is allowed.