Hinnaedastus

Hinnaedastus, Finnish for price transmission, is the process whereby changes in prices at one stage of the production and distribution chain are passed through to prices at downstream stages or to consumer prices. It covers transmission within domestic markets as well as across borders and markets.

The transmission occurs through several channels: changes in input costs; changes in wholesale prices; shifts in markups, inventories, contracts, and regulatory pricing. The speed and extent depend on market structure, competition, price rigidity, and contractual arrangements; in tightly competitive markets, pass-through tends to be higher and quicker, whereas in monopolistic or regulated segments it can be slower or incomplete.

Determinants include demand elasticity, timing of price adjustments (menu costs), currency fluctuations, taxes and subsidies, and globalization. The longer-run pass-through may differ from the short-run due to inventory adjustments and capital costs.

In empirical work, pass-through is measured with coefficients indicating the fraction of a price change that is transmitted; researchers distinguish short-run and long-run pass-through and may use econometric models such as time-series or vector error correction models. Pass-through varies by sector; energy, food, and durable goods show pronounced transmission, while services can be more muted.

Significance: understanding hinnaedastus informs inflation dynamics, monetary policy, and sectoral pricing strategies. Limitations include incomplete transmission, time lags, and changing market conditions.