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Intercommodity price transmittal : analysis offood markets in Ghana

  • Alderman, Harold

This report expands on a dynamic model of market integration to investigate how information is transmitted across commodities. The author investigates one property of an efficient market : the full use of available information. Studies of spatial price integration simultaneously looks at the flow of information and commodities. The author investigates the flow of information within a single spatial market and the relationship between prices in spatially separate markets. He studies intercommodity price transmittal from two perspectives. First, he asks whether the government can concentrate on a single commodity price, yet achieve policy objectives in a broader arena. This is important in Ghana because no single commodity dominates consumers'food budgets. The author finds that price movements for the main cereal consumed in the country (maize) are fully transmitted to other regions. Second, he investigates the working of commodity markets in developing countries. He notes imperfections in the way markets process information. There are several possible explanations for this market inefficiency. Traders may set prices for other coarse grains in response to information about maize prices. Another possibility is that some traders may not deal in all grains and thus have different costs of acquiring information. In short the author's dynamic model of price integration indicates functional efficiency in Ghana.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 884.

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Date of creation: 30 Apr 1992
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Handle: RePEc:wbk:wbrwps:884
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  1. Durbin, J, 1970. "Testing for Serial Correlation in Least-Squares Regression When Some of the Regressors are Lagged Dependent Variables," Econometrica, Econometric Society, vol. 38(3), pages 410-21, May.
  2. Schwert, G William, 2002. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 5-17, January.
  3. Harriss, Barbara, 1979. "There is Method in My Madness: Or is it Vice Versa? Measuring Agricultural Market Performance," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
  4. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  5. Heytens, Paul J., 1986. "Testing Market Integration," Food Research Institute Studies, Stanford University, Food Research Institute, issue 01.
  6. Deaton, Angus S, 1977. "Involuntary Saving through Unanticipated Inflation," American Economic Review, American Economic Association, vol. 67(5), pages 899-910, December.
  7. 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 1609, Iowa State University, Department of Economics.
  8. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100 Elsevier.
  9. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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