Dynamic vertical price transmission in the wheat–flour–bread market: Evidence from Bosnia and Herzegovina

Price transmission in staple-food markets is particularly important in small, import-dependent economies, yet evidence for Bosnia and Herzegovina remains scarce. Using 44 quarterly observations from 2014 Q1 to 2024 Q4, we examine long-run co-movement, short-run adjustment, and possible asymmetric responses using a Vector Error-Correction framework supplemented by impulse-response analysis, variance decomposition, and auxiliary asymmetric error-correction models. Conventional Johansen inference supports a single cointegrating relationship, but this result is not robust to small-sample adjustment and is therefore interpreted cautiously. Conditional on the baseline rank-one specification, the strongest error-correction loading occurs in the flour consumer-price equation. Impulse-response point estimates are compatible with delayed and attenuated responses of flour and bread prices to wheat-price innovations. However, neither downstream response is statistically significant under the baseline ordering. Conditional on the maintained rank-one specification, HC1-robust Wald inference indicates asymmetric equilibrium correction in the bread consumer-price equation, while short-run asymmetry with respect to positive and negative wheat-price changes is only marginally supported at the 10% level. Overall, the findings suggest economically relevant dynamic co-movement among the observed price series, but provide limited support for strong claims of causal or stage-specific transmission. The results underline the need for improved market monitoring and more detailed import, cost, and stage-specific price data to support food-market policy in Bosnia and Herzegovina.