Modeling Pork Supply Response and Price Volatility: The Case of Greece

This paper examines the supply response of the Greek pork market. A GARCH process isused to estimate expected price and price volatility, while price and supply equations areestimated jointly. In addition to the standard GARCH model, several different symmetric,asymmetric, and nonlinear GARCH models are estimated. The empirical results indicate thatamong the estimated GARCH models, the quadratic NAGARCH model seems to betterdescribe producers’ price volatility, which was found to be an important risk factor of thesupply response function of the Greek pork market. Furthermore, the empirical findings showthat feed price is an important cost factor of the supply response function and that highuncertainty restricts the expansion of the Greek pork sector. Finally, the model providesforecasts for quantity supplied, producers’ price, and price volatility.