Co-integration Analysis of Maize Marketing in Osun State, Nigeria
Abstract
The aim of the study was to examine market integration and price variation in white maize marketing in Osun State, Nigeria. Specific issues addressed in the study were the determination of existence of co-integration between the rural and urban markets and the leading market between the rural and urban markets for maize. Secondary data were used in this study. The data were sourced from Osun State Agricultural Development Programme. The average monthly retail price (N/Kg) of white maize covering the period, January, 2000 to December, 2010 (11 years) for Osogbo (urban market), Telemu (rural market) and Erin Ijesa (rural market) were used. Coefficient of variation and price correlation coefficient were used to examine the behavior of white
maize market price in urban and rural areas of Osun State. The Augmented Dickey-Fuller (ADF) test was used to investigate stationarity in the pairs of prices while the Johansen co-integration technique was used to determine the existence of co-integration between the markets. Augmented Dickey Fuller procedure (ADF) indicated that all the variables and the individual price series for maize were not stationary at their respective levels, but stationary at their first difference. Both the trace and maximum eigen value statistics indicated the existence of co-integration relationship at 5% significant level for the pairs of product prices, implying that maize markets during the study period were linked with each other and therefore the long-run equilibrium was
stable. The results also indicated that urban maize markets did not granger-cause rural maize markets), while rural maize markets granger caused urban maize markets at 5% level of significance respectively. The error correction model showed significant causality link between the rural and urban markets, suggesting a clear trend in price leadership. It follows that there could be efficiency in transmission of price information among
operators if relative stability is attained in the rural markets of white maize in Nigeria. The study concluded that maize markets in both urban and rural areas of Osun were co-integrated and had short-run and long-run
relationships, with rural maize markets occupying the leadership position in price formation and transmission.
maize market price in urban and rural areas of Osun State. The Augmented Dickey-Fuller (ADF) test was used to investigate stationarity in the pairs of prices while the Johansen co-integration technique was used to determine the existence of co-integration between the markets. Augmented Dickey Fuller procedure (ADF) indicated that all the variables and the individual price series for maize were not stationary at their respective levels, but stationary at their first difference. Both the trace and maximum eigen value statistics indicated the existence of co-integration relationship at 5% significant level for the pairs of product prices, implying that maize markets during the study period were linked with each other and therefore the long-run equilibrium was
stable. The results also indicated that urban maize markets did not granger-cause rural maize markets), while rural maize markets granger caused urban maize markets at 5% level of significance respectively. The error correction model showed significant causality link between the rural and urban markets, suggesting a clear trend in price leadership. It follows that there could be efficiency in transmission of price information among
operators if relative stability is attained in the rural markets of white maize in Nigeria. The study concluded that maize markets in both urban and rural areas of Osun were co-integrated and had short-run and long-run
relationships, with rural maize markets occupying the leadership position in price formation and transmission.
Full Text:
PDFRefbacks
- There are currently no refbacks.