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Devaluation and Cattle Markets Integration in Burkina Faso

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Author Info

  • Claudio ARAUJO

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Catherine ARAUJO BONJEAN

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Jean-Louis COMBES

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Pascale COMBES MOTEL

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

The aim of this paper is to highlight an aspect of devaluation that is generally ignored in the literature, namely, its positive impact on domestic trade. We develop a parity bounds model for cattle markets of Burkina Faso with two regimes of prices, autarkic and integrated, consistent with spatial and inter-temporal arbitrage conditions. When markets are autarkic, prices follow a random walk and when markets are integrated, prices are equal up to transaction costs. The integrated regime is more likely when transaction costs are low. In our model, the 1994 franc CFA devaluation reduces transaction costs relatively to cattle prices, thereby promoting markets integration. The model is tested using a switching regression with exogenous selection variables. The results show that the probability of market integration significantly increased after the devaluation.

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File URL: http://publi.cerdi.org/ed/2001/2001.14.pdf
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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200114.

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Length: 26
Date of creation: 2001
Date of revision:
Publication status: Published in Journal of African Economies, 2005, pages 359-384
Handle: RePEc:cdi:wpaper:162

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Keywords: panel data.; switching regression model; burkina faso; franc CFA devaluation; cattle; inter-temporal arbitrage; Market integration;

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  1. Fafchamps, Marcel & Gavian, Sarah, 1996. "The Spatial Integration of Livestock Markets in Niger," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 5(3), pages 366-405, October.
  2. Jean-Paul Azam & Catherine Bonjean, 1995. "La formation du prix du riz : théorie et application au cas d'Antananarivo (Madagascar) ," Revue Économique, Programme National Persée, Programme National Persée, vol. 46(4), pages 1145-1166.
  3. Ancey, V., 1998. "La hausse des prix du betail et l'economie de l'elevage au Burkina Faso," Papers, Laval - Centre Sahel (98)488, Laval - Centre Sahel.
  4. Pascale Motel-Combes, 1996. "Les déterminants de l'offre de bétail dans les pays sahéliens," Revue économique, Presses de Sciences-Po, Presses de Sciences-Po, vol. 0(5), pages 1103-1119.
  5. Goodwin, Barry K. & Piggott, Nicholas E., 1999. "Spatial Market Integration In The Presence Of Threshold Effects," 1999 Annual meeting, August 8-11, Nashville, TN, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 21489, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 1-25, January.
  7. 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, Agricultural and Applied Economics Association, vol. 78(3), pages 825-829.
  8. Spiller, Pablo T & Huang, Cliff J, 1986. "On the Extent of the Market: Wholesale Gasoline in the Northeastern United States," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 35(2), pages 131-45, December.
  9. Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
  10. Kling, Catherine L. & Sexton, Richard & Carman, Hoy, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," Staff General Research Papers, Iowa State University, Department of Economics 1609, Iowa State University, Department of Economics.
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Cited by:
  1. Félix Badolo, 2011. "Transmission des chocs de prix internationaux : le cas du riz au Burkina Faso," Working Papers, HAL halshs-00627189, HAL.
  2. van Campenhout, Bjorn, 2005. "Modelling Trends in Food Market Integration: Method and an Application to Tanzanian Maize Markets," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark, European Association of Agricultural Economists 24718, European Association of Agricultural Economists.

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