Analysis of transmission elasticity of international prices for sugar prices in Brazil: an application of the Structural Model

Authors

• Mario Antonio Margarido Assessoria de Política Tributária e Econômica, Secretaria da Fazenda do Estado de São Paulo
• Pery Francisco Assis Shikida
• Juan Carllos Ayala Calvo

DOI:

https://doi.org/10.17058/redes.v23i1.8686

Keywords:

Elasticity, Price transmission, International trade, Sugar.

Abstract

This study aims to determine and analyze the spatial elasticity (or horizontal) of price transmission between international sugar prices and the average price received by the Brazilian exporter of sugar, using the Structural Model. The data used are from January/2004 to November/2015. As a result, variations of 1% in the international sugar price are transmitted to the average price received by Brazilian sugar exporters with a magnitude of 0.3% on average, setting inelastic relationship between the two variables and, consequently, the non-occurrence of the law of one price. So, there are mechanisms in this market that are hindering the full functioning of the arbitration. This situation is not unusual, because the sugar is one of the most commercially protected product and suffer much interference.