OVERREACTIVE TO INTERNATIONAL MARKETS? PRICING MECHANISMS AND VALUE CHAINS IN RA VEGETABLE OIL MARKET

Armenia imports all of its vegetable oil for domestic consumption, consisting mainly of sunflower oil imported almost entirely from Russia. Thus, the price in Armenia is formed based on the purchasing price, transportation costs, and margin. But the price movements in the Armenian retail market are not always consistent with the international markets, which rises the need for a comprehensive micro and macro-level analysis. In this article, the authors analyze the price value chains on micro-level data and reveal factors determining retail market price with econometric models. The analysis showed, that the key determinants are the international price of vegetable oil, USD/AMD exchange rate, and domestic inflationary factors. The article argues that the movements of the Armenian vegetable oil market are not always consistent with the changes in these factors: the market overreacts with increased margins during turbulent periods. This pattern was confirmed both in 2021 and 2022 when despite the divergence of Russian and international prices and the relative stability of the Armenian market, the analysis showed increased markups.