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We safely reject the hypothesis the semolina prices do not cause pasta prices while we fail to reject the hypothesis that pasta prices do not cause semolina prices (the p-value was 0.927).
This implies that pasta producer price could respond differently to rising and falling semolina prices with respect to both the magnitude and speed.
Then, beginning March 2008 the semolina prices reversed the trend and returned to the level at which they began their rather dramatic increases, while the pasta price reduction was started some month later.
In the second hypothesis test shown in Eq. (3), all lagged variables are incorporated both for increasing and decreasing components of the model to test whether the pasta prices return to same level after equivalent increases and decreases in the semolina prices.
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The results1 show that semolina price causes pasta price while pasta price does not affect semolina price.
Fig. 2 Estimated effect on pasta producer price of an equivalent semolina price increase and decrease.
The semolina price decreases are transmitted more slowly on pasta price than increases.
Next, we examine the impact of a semolina price decrease of €0.10.
On July 2007, there is a considerable increase recorded first in semolina price and, afterwards, in pasta price.
After the adjustment process was complete, we introduce an equivalent reduction of €0.10 per kilo on semolina price.
In this case, the pasta price adjustment to semolina price increase produces a price of 1.004 with a transmission rate of 0.4%% (Fig. 2).
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com