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Market integration and Price transmission between Selected imported Rice and Local Rice markets in Ghana. Application of Non-linear Co-integration Approach

Author Affiliations

  • 1Department of Agricultural Economics, College of Agriculture, Professor Jayashankar Telangana State Agriculture University,Hyderabad-500030, India
  • 2Department of Agricultural Economics, College of Agriculture, Professor Jayashankar Telangana State Agriculture University,Hyderabad-500030, India

Res. J. Agriculture & Forestry Sci., Volume 4, Issue (2), Pages 1-7, February,8 (2016)

Abstract

Agricultural policy-makers are drudging through marketing policies to ensure proper functioning of agricultural markets and marketing channels to ensure food security, welfare impacts from marketing policies, and bridge the discrepancy between the affluent and deprived regions. Market integration analysis is important in explaining markets performance and their response to each other. This present study was conducted to examine the market integration and price transmission dynamics between imported and local rice market in Ghana. The dataset for the analysis was monthly average prices from November 2006 through December 2013. The estimations were performed using consistent momentum threshold autoregressive model and momentum threshold error correction model (M-TECM). The results of the consistent momentum threshold autoregressive (CMTAR) model revealed co integration between the imported and local rice market and a higher rate of price transmission from imported rice to local rice market. The results from the (M-TECM) revealed some markets are characterized by asymmetric price transmission in the long-run indicating market imperfections with little adjustment for negative deviations as compared to the substantial positive perturbation or shock. This implies that intermediaries’ response quickly to price movements that stretch the profit margin than movements that squeezes margin which tend to push burden onto consumers. The results of the study recommend that the government should develop strong agricultural marketing policies to regulate the activities of the market intermediaries and design strategies to develop the quality of the local rice to compete well with the imported rice. Further it is suggested future studies should consider the assessment of food and trade policies such as tariff rate effect on market integration and price transmission before policy-makers consider the option of imposing higher or reduction of tariff on imported rice.

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