The role of fuel prices in spatial price transmission between horticultural markets: Empirical analysis from a developing country

This article aims to analyze how fuel prices impact spatial price transmission between two Chilean horticultural wholesale markets. We implement a regime-dependent VECM where price transmission parameters depend on dynamics imposed by a stationary exog-enous variable (fuel price). We identified two price transmission regimes characterized by different equilibrium relationships and short-run adjustment processes. This implies that fuel prices affect price transmission elasticities and intermarket adjustment speeds. Our results show increasing marketing costs as farm to market distance grows. This impact depends on each product’s attributes.