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Original Research

DYNAMICS OF PRICE TRANSMISSION AND THE EFFECT OF COVID-19 ON THE BROILER INDUSTRY IN INDONESIA: PANEL ARDL APPROACH

NUR AFNI EVALIA 1, HARIANTO HARIANTO 2, RITA NURMALINA 3, and DEDI BUDIMAN HAKIM 4.

Vol 18, No 01 ( 2023 )   |  DOI: 10.17605/OSF.IO/6A3KM   |   Author Affiliation: Department of Agribusiness, Andalas University, West Sumatra 1; Department of Agribusiness, Faculty of Economics and Management Bogor Agricultural University 2,3; Department of Economics, Faculty of Economics and Management, Bogor Agricultural. University International Center for Applied Finance and Economics (Intercafe) IPB 4.   |   Licensing: CC 4.0   |   Pg no: 1568-1580   |   Published on: 27-01-2023

Abstract

Broilers are strategic food commodities that contribute significantly to fulfilling animal protein needs. This study aimed to analyze the dynamics of price transmission in the broiler industry through vertical and horizontal integration. It also intended to determine the price transmission’s relationship with corn input and the impact of COVID-19 on broilers. The study used panel monthly time series data from 2010M01-2020M12 and cross-section data from 28 provinces. It also employed the Panel Autoregressive Distributed Lag (PARDL) – Pooled Mean Group (PMG) approach. The results showed short- and long-term vertical integration between the broiler market at the producer and consumer levels. The negative price transmission in producer and consumer markets is probably caused by market power in the broiler industry. Furthermore, there is short- and long-term horizontal transmission between broilers and eggs. The results indicated no co-integration of corn input with broiler output in the short and long term. However, there is short-term integration between producer and consumer-level corn prices and consumer-level broiler prices in several provinces. COVID-19 significantly and negatively affects consumer-level broiler prices in the short and long term. Therefore, the study recommended issuing a mandatory export policy for large companies to overcome the oversupply of broiler products in the country


Keywords

Price transmission, vertical and horizontal integration, broilers, PARDL, market power