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Border effects on spatial price transmission between fresh tomato markets in Ghana and Burkina-Faso: Any case for promoting trans-border trade in West Africa?

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  • Amikuzuno, Joseph
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    Abstract

    Cross-border trade in food commodities within sub-regional economic blocks in Sub-Sahara Africa (SSA) is believed to be faster, cheaper, more convenient and welfare-enhancing than overseas trade between SSA countries and the USA, EU and the BRIC countries. The difficulty of commodity arbitrage across international borders SSA is however a fundamental constraint to price transmission, market integration and the realisation of the welfare enhancing role of cross-border trade in Africa. This study examines the impact of border and distance on price transmission between tomato markets in Ghana and Burkina-Faso. Theanalysis applies a regime-switching vector error correction model to estimate semi-weekly, wholesale prices of tomato in four tomato markets in Ghana and a production centre in Burkina-Faso. Estimated parameters of price transmission contain evidence of border and distance effects. This is expected since high transfer costs, including cross-border tariffs are incurred by traders in moving tomato across the border. Moreover, the perishable nature of tomato, and the poor quality of roads and transportation facilities may imply additional costs of risks to arbitrageurs. The findings have both theoretical relevance and practical implications for facilitating cross-border trade in West Africa, especially for trade between landlocked countries like Burkina-Faso and coastal ones like Ghana. --

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    Bibliographic Info

    Paper provided by Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO) in its series IAMO Forum 2011: Will the "BRICs Decade" Continue? – Prospects for Trade and Growth with number 9.

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    Date of creation: 2011
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    Handle: RePEc:zbw:iamo11:9

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    Keywords: Price Transmission; Border; Tomato; Ghana; Burkina-Faso;

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    1. Parrott, Scott D. & Eastwood, David B. & Brooker, John R., 2001. "Testing For Symmetry In Price Transmission: An Extension Of The Shiller Lag Structure With An Application To Fresh Tomatoes," Journal of Agribusiness, Agricultural Economics Association of Georgia, Agricultural Economics Association of Georgia, vol. 19(1).
    2. Ihle, Rico & von Cramon-Taubadel, Stephan & Zorya, Sergiy, 2010. "Country and border effects in the transmission of maize prices in Eastern Africa: evidence from a semi-parametric regression model," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Afri 96184, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
    3. Jochen Meyer & Stephan Cramon-Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 55(3), pages 581-611.
    4. Goetz, Linde & von Cramon-Taubadel, Stephan, 2008. "Considering threshold effects in the long-run equilibrium in a vector error correction model: An application to the German apple market," 2008 International Congress, August 26-29, 2008, Ghent, Belgium, European Association of Agricultural Economists 44247, European Association of Agricultural Economists.
    5. Mesbah Motamed & Kenneth A. Foster & Wallace E. Tyner, 2008. "Applying cointegration and error correction to measure trade linkages: maize prices in the United States and Mexico," Agricultural Economics, International Association of Agricultural Economists, vol. 39(1), pages 29-39, 07.
    6. Abdulai, Awudu, 2000. "Spatial price transmission and asymmetry in the Ghanaian maize market," Journal of Development Economics, Elsevier, Elsevier, vol. 63(2), pages 327-349, December.
    7. Padilla-Bernal, Luz E. & Thilmany, Dawn D. & Loureiro, Maria L., 2003. "An Empirical Analysis of Market Integration and Efficiency for U.S. Fresh Tomato Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 28(03), December.
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