Spatial Price Transmission and Market Integration of Some Selected Local Rice Markets in Ghana

Abstract

Movement of price within a country is of great significance to economists since it experiential evaluation of how a change in price in one local market can affect prices of a similar commodity in another local market. Usually, due to poor nature road infrastructure transfer costs are higher in developing countries compared to developed countries since price hints that are transferred to producers are totally different from the consumer price. The aim of this work was to give proof of price transmission and market integration of local rice in some selected markets. Monthly wholesale prices of milled rice over the period 2006 to 2015 were used in the analysis. The Augmented Dicky-fuller test was used to check for stationarity of all the separate price series. All the price series data that were used tested for Unit Root. They were all found to be stationary after first difference at 1%. Cointegration analysis was done using the Momentum Consistent Threshold Autoregressive Model (MC-TAR). All the price pairs were found to be cointegrated. The market pairs were found to also exhibit asymmetric adjustments. It was found from the Error Correction Model estimates that in Ho and Accra markets, following a positive shock that creates disequilibrium, 46% of such shocks will be eliminated within a month. Similarly, in Tamale and Kumasi markets, positive shocks that leads to disequilibrium 1.6% of such deviation will be eliminated within a month. The results of Granger causality revealed that Ghanaian rice markets are well integrated. The markets exhibit both bidirectional and unidirectional causality with the producer markets exhibiting price leadership. It is suggested that, policy be focused on price stabilization and also, the SRID unit of MoFA should be equipped financially to inform market participants about current prices through the media and other outlets.