Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 53
We assess market integration and price transmission of perishable agricultural produce in Sub-Saharan Africa by studying Ghanaian tomato markets which are characterized by pronounced seasonality in production and trade flows. We analyse the tomato markets of Ghana by simultaneously regarding its five most important markets, Navrongo, Techiman, Kumasi, Tamale and Accra, in a multivariate asymmetric price transmission framework. The estimation of the model is based on a unique dataset and on a modified version of the Johansen estimation procedure which is suitable for estimating such multivariate models. We estimate the price transmission parameters for four regimes which are a combination of the seasonal patterns in trade flows and asymmetries in the long-run price equilibrium between the most important production region (Techiman) and the most important consumption centre for tomatoes (Accra). We find strong evidence for integration of the five markets. In general, price transmission appears to be fast. Disequilibria mainly trigger price responses in the two production regions of Navrongo and Techiman. The regimes are found to matter for the whole system of tomato markets. Disequilibrium is shown to spillover between the price relationships. Consequently, tomato markets in Ghana appear to be integrated and function very well since price signals are rapidly passed through the country.
asymmetric price transmission cointegration Ghana regime-dependent model seasonality tomato vector error-correction model