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The Integration of Tomato Markets in Ghana with and without Direct Trade Flows

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  • Ihle, Rico
  • Amikuzuno, Joseph

Abstract

Spatial market equilibrium theory views trade flow as the driving force behind market integration. We assess spatial price transmission between domestic tomato markets in Ghana to ascertain whether spatial price transmission veritably depends on direct trade between markets, or whether other forces drive market integration. We analyze a unique data set on tomato trade consisting of semi-weekly price and trade flow data for the five most important Ghanaian markets for fresh tomato, which represents one of the most important commercially produced and consumed vegetables in the country. A regime-dependent vector error correction model is proposed to investigate this question, and the results are compared with those of a linear vector error correction model. The analysis reveals that prices in net producing areas of Ghana, viz. Navrongo and Techiman, adjust quickly to disequilibria, while prices in most major consuming areas do not show significant error correction. Markets are partly found to be strongly integrated even in periods without direct trade flows. Information exchange among suppliers or third-market effects might offer possible explanations to this finding.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51402.

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Date of creation: 2009
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Handle: RePEc:ags:iaae09:51402

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Related research

Keywords: Keywords— spatial market integration; regime-dependent vector error correction model; information flow; Ghana; tomato.; Agricultural and Food Policy; Food Security and Poverty; International Relations/Trade; Marketing; JEL: C32; Q11; Q13; F14;

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References

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  1. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
  2. Christopher B. Barrett, 1996. "Market Analysis Methods: Are Our Enriched Toolkits Well Suited to Enlivened Markets?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
  3. Jesus Gonzalo & Jean-Yves Pitarakis, 2006. "Threshold effects in cointegrating relationships," Economics Working Papers we20060621, Universidad Carlos III, Departamento de Economía.
  4. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
  5. Paul L. Fackler & H�seyin Tastan, 2008. "Estimating the Degree of Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 69-85.
  6. Hansen, Bruce E. & Seo, Byeongseon, 2002. "Testing for two-regime threshold cointegration in vector error-correction models," Journal of Econometrics, Elsevier, vol. 110(2), pages 293-318, October.
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Cited by:
  1. Amikuzuno, Joseph & Ihle, Rico, 2010. "Seasonal Asymmetric Price Transmission in Ghanaian Tomato Markets: Adapting Johansen’s Estimation Method," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 96814, African Association of Agricultural Economists (AAAE) & Agricultural Economics Association of South Africa (AEASA).

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