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Integration In Benin Maize Market: An Application Of Threshold Cointegration Analysis

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  • McKenzie, Andrew M.
  • Pede, Valerien O.

Abstract

The degree to which markets are spatially efficient has important implications for market liberalization and other policy reforms. After several attempts to control and regulate the marketing of maize in Benin, a liberalized free-market system was finally adopted in 1990. It was assumed that a free-market system would perform more efficiently and enhance maize market integration compared with the more government oriented systems of the past. However, trade barriers still exist in the form of traders' associations across market locations. Recent market integration literature has focused on the influence of transaction costs and threshold effects on tests for integration. Hansen and Seo's two regime threshold cointegration model is used to analyze the degree of integration between seven Benin maize markets for the September 1998 to September 2001 period. We find mixed evidence of threshold cointegration. Threshold effects are found in thirteen out of twenty-one market pairs. However, threshold estimates are not consistent with observed transaction costs and further investigation of error-correction parameter estimates cast some doubt as to the validity of some of the threshold results. We conclude that the two regime threshold model may not adequately capture the trade barriers associated with the traders' associations.

Suggested Citation

  • McKenzie, Andrew M. & Pede, Valerien O., 2005. "Integration In Benin Maize Market: An Application Of Threshold Cointegration Analysis," 2005 Annual meeting, July 24-27, Providence, RI 19293, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19293
    DOI: 10.22004/ag.econ.19293
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    References listed on IDEAS

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    8. Enders, Walter & Falk, Barry, 1998. "Threshold-autoregressive, median-unbiased, and cointegration tests of purchasing power parity," International Journal of Forecasting, Elsevier, vol. 14(2), pages 171-186, June.
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    Cited by:

    1. Valdes, R. & Von Cramon, S. & Engler, A., 2018. "The role of fuel prices on the wholesale price relationships between horticultural markets," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277064, International Association of Agricultural Economists.
    2. Mohammad Jahangir Alam & Andrew M. McKenzie & Ismat Ara Begum & Jeroen Buysse & Eric J. Wailes & Md. Abdur Rouf Sarkar & Abdullah Al Mamun & Guido Huylenbroeck, 2022. "Spatial market integration of rice in Bangladesh in the presence of transaction cost," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 10(1), pages 1-21, December.
    3. Ihle, Rico & von Cramon-Taubadel, Stephan, 2008. "A Comparison of Threshold Cointegration and Markov-Switching Vector Error Correction Models in Price Transmission Analysis," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37603, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    4. Alam, Mohammad Jahangir & McKenzie, Andrew M. & Buysse, Jeroen & Begum, Ismat Ara & Wailes, Eric J. & Van Huylenbroeck, Guido, 2012. "Measuring Market Integration in the Presence of Threshold Effect: The Case of Bangladesh Rice Markets," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124435, Agricultural and Applied Economics Association.

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