Macro-monetary effects on agricultural prices: the case of Greek agriculture

The macroeconomic effects on agricultural prices in the Greek economy and, in particular, differences in prices paid and received by farmers (cost-price squeeze) are examined employing integration and cointegration analysis. A Johansen cointegration test between prices paid and prices received by farmers supports the presence of cost-price squeeze, since non-cointegration between the two price indices cannot be rejected. In other words, prices paid by farmers respond more than prices received by farmers during inflationary periods and hence affect their parity ratio. Multivariate cointegration tests indicated that forces outside agriculture can explain the non-cointegration between farm input and output prices. These forces are monetary macro variables through the country's macroeconomic policy, such as money supply, the general price level and the domestic product.