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Devaluation and Cattle Market Integration in Burkina Faso

Author

Listed:
  • Claudio Araujo
  • Catherine Araujo Bonjean
  • Jean-Louis Combes
  • Pascale Combes Motel

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 the integration of domestic markets of tradable goods. The analysis applies to cattle markets in Burkina Faso where cattle is both a tradable and a capital good that can be held inter-temporally. We develop an exogenous switching regime regression model consistent with spatial and inter-temporal arbitrage conditions which categorise markets in two regimes: autarkic and integrated. When markets are autarkic, prices follow a random walk. Conversely, when two markets are integrated, their prices are closely correlated. The switching between the two regimes is driven by transaction costs which are supposed to be a function of the real effective exchange rate, among other variables. Devaluation is shown to have a negative impact on real transaction costs and thus to promote cattle market integration. Copyright 2005, Oxford University Press.

Suggested Citation

  • Claudio Araujo & Catherine Araujo Bonjean & Jean-Louis Combes & Pascale Combes Motel, 2005. "Devaluation and Cattle Market Integration in Burkina Faso," Journal of African Economies, Centre for the Study of African Economies, vol. 14(3), pages 359-384, September.
    • Handle: RePEc:oup:jafrec:v:14:y:2005:i:3:p:359-384
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    Cited by:

    1. Somlanare Romuald KINDA & Félix BADOLO, 2014. "Climatic Variability and Food Security in Developing Countries," Working Papers 201405, CERDI.
    2. Félix BADOLO, 2011. "Transmission des chocs de prix internationaux : le cas du riz au Burkina Faso," Working Papers 201129, CERDI.
    3. Félix Badolo, 2011. "Transmission des chocs de prix internationaux : le cas du riz au Burkina Faso," Working Papers halshs-00627189, HAL.
    4. Félix Badolo, 2011. "Transmission des chocs de prix internationaux : le cas du riz au Burkina Faso," CERDI Working papers halshs-00627189, HAL.
    5. repec:ags:ijag24:346854 is not listed on IDEAS
    6. Félix Badolo, 2012. "Chocs de prix internationaux et transmission : cas du marché du riz au Burkina Faso," L'Actualité Economique, Société Canadienne de Science Economique, vol. 88(3), pages 317-346.
    7. Kabbiri, Ronald & Dora, Manoj & Elepu, Gabriel & Gellynck, Xavier, 2016. "A Global Perspective of Food Market Integration: A Review," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 55(01-2), May.
    8. Somlanare Romuald Kinda, 2016. "Climatic shocks and food security: The role of foreign aid," Working Papers hal-01260846, HAL.
    9. Van Campenhout, Bjorn, 2007. "Modelling trends in food market integration: Method and an application to Tanzanian maize markets," Food Policy, Elsevier, vol. 32(1), pages 112-127, February.

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