Gurmu, M., Meyer, F., Hassan, R. (2017). Modelling Price Formation and Dynamics in the Ethiopian Maize Market. Journal of Agricultural Science and Technology, 19(Supplementary Issue), 1439-1452.
M. Y. Gurmu; F. Meyer; R. Hassan. "Modelling Price Formation and Dynamics in the Ethiopian Maize Market". Journal of Agricultural Science and Technology, 19, Supplementary Issue, 2017, 1439-1452.
Gurmu, M., Meyer, F., Hassan, R. (2017). 'Modelling Price Formation and Dynamics in the Ethiopian Maize Market', Journal of Agricultural Science and Technology, 19(Supplementary Issue), pp. 1439-1452.
Gurmu, M., Meyer, F., Hassan, R. Modelling Price Formation and Dynamics in the Ethiopian Maize Market. Journal of Agricultural Science and Technology, 2017; 19(Supplementary Issue): 1439-1452.
Modelling Price Formation and Dynamics in the Ethiopian Maize Market
1Department of Agricultural Economics, Extension and Rural Development, University of Pretoria, South Africa.
2Bureau for Food and Agricultural Policy (BFAP), University of Pretoria, South Africa.
3Centre for Environmental Economics and Policy Analysis (CEEPA), University of Pretoria, South Africa.
Receive Date: 23 July 2016,
Revise Date: 30 January 2017,
Accept Date: 27 February 2017
Abstract
This study is an attempt to examine price formation, and dynamics in the Ethiopian maize market. A single commodity partial equilibrium and the Johansen’s co-integration approaches were used to investigate maize price formation and market integration in the Ethiopian maize market. Findings from the maize industry outlook indicated that maize production is expected to grow for the forecasted period. An increase in maize production was, however, not enough to offset the growth on the demand side. From the yield simulation analysis, we found that a 20% increase in maize yield would reduce nominal maize price by 81%. Co-integration analysis indicated that the Ethiopian wholesale maize markets have become more efficient in the recent years suggesting that price related information is transmitted more efficiently across consumption and production wholesale maize markets.
1. Abate, T., Bekele, S., Abebe, M., Dagne, W., Yilma, K., Kindie, T., Menale, K., Gezahegn, B., Berhanu, T. and Tolera, K. 2015. Factors that Transformed Maize Productivity in Ethiopia. Food Sec., 7: 965–981. 2. Alemu, Z. G., Oosthuizen, K. and van Schalkwyk, H. D. 2003. Grain-Supply Response in Ethiopia: An Error-Correction Approach. Agrekon, 42: 389-404. 3. Asche, F., Gjølberg, O. and Guttormsen, A. G. 2012. Testing the Central Market Hypothesis: A Multivariate Analysis of Tanzania Sorghum Markets. Agri. Econ, 43: 115-123. 4. Azzam, A. A. and Hawdon, D. 1999. Estimating the Demand for Energy in Jordan: A Stock-Watson Dynamic OLS (DOLS) Approach. Surrey Energy Economics Discussion Paper, University of Surrey, UK. 5. Bai, J. and Perron, P. 1998. Estimating and Testing Linear Models with Multiple Structural Changes. Econometrica, 66: 47-68. 6. Brooks, C. 2008. Introductory Econometrics for Finance. Second Edition, Cambridge University Press, UK. 7. Central Statistical Agency (CSA). 2011. Agricultural Sample Survey 2010/2011. I. Report on Area and Production of Major Crops (Private Peasant Holdings, Meher Season. Statistical bulletin, Addis Ababa. 8. Chapoto, A. and Jayne, T. 2009. The Impacts of Trade Barriers and Market Interventions on Maize Price Predictability: Evidence from Eastern and Southern Africa. International Development Draft Working Paper 102, Michigan State University. 9. De, Z. H. O. U. and Koemle, D. 2015. Price Transmission in Hog and Feed Markets of China. J. Int. Agri., 14(6): 1122-1129. 10. Diao, X., Kennedy, A., Mabiso, A. and Pradesha, A. 2013. Economy Wide Impact of Maize Export Bans on Agricultural Growth and Household Welfare in Tanzania: A Dynamic Computable General Equilibrium Model Analysis. International Food Policy Research Institute (IFPRI), Discussion Paper 01287, Washington, DC. 11. Dickey, D. A., and Fuller, W. A. 1979. Distribution of the Estimator for Autoregressive Time Series with a Unit Root. J. A. Stat. Ass, 74(366): 427-431. 12. Getnet, K., Verbeke, W. and Viaene, J. 2005. Modelling Spatial Price Transmission in the Grain Markets of Ethiopia with an Application of ARDL Approach to White Teff. Agri. Econ., 33: 491-502. 13. Jaleta, M. and Gebermedhin, B. 2009. Price Co-Integration Analyses of Food Crop Markets: The Case of Wheat and Teff Commodities in Northern Ethiopia. The International Association of Agricultural Economists Conference, Beijing, China; August 16-22, 2009. 14. Johansen, S. and Juselius, K. 1990. Maximum Likelihood Estimation and Inference on Co-integration with Applications to the Demand for Money. Ox. B. Econ. Stat., 52: 169-210. 15. Johansen, S. 1991. Estimation and Hypothesis Testing of Co-Integration Vectors in Gaussian Vector Autoregressive Models. Econometrica, 59(6): 1551-1580. 16. Kelbore, Z. G. 2013. Transmission of World Food Prices to Domestic Market: The Ethiopian Case. University of Trento. Retrieved from [https://mpra.ub.uni-muenchen.de/49712]. 17. Negassa, A., Myers, R. and Gabre-Madhin, E. 2004. Grain Marketing Policy Changes and Spatial Efficiency of Maize and Wheat Markets in Ethiopia. MTDI Discussion Paper 66, International Food Policy Research Institute (IFPRI), Washington, DC 18. Perron, P. 1989. The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis. Econometrica, 57: 1361-1401. 19. Phillips, P. C. B. 1986. Understanding Spurious Regression in Econometrics, J. Econom., 33: 311-340. 20. Pindyck, R. S. and Rubinfeld, D. L. 1991. Econometric Models and Economic Forecasts. McGraw-Hill, NewYork. 21. Porteous, O. C. 2012. Empirical Effects of Short-Term Export Bans: The Case of African Maize. Working Paper, Department of Agricultural Economics, University of California, Berkeley. 22. Rafailidis, P. and Katrakilidis, C. 2014. The Relationship between Oil Prices and Stock Prices: A Non-Linear Asymmetric Co-Integration Approach, Ap. Fin. Econ., 24: 793-800. 23. Ravallion, M. 1986. Testing Market Integration. A. J. Agr. Econ., 68(1): 102-09. 24. Regional Agricultural Trade Expansion Support Programme (RATES). 2003. Maize market Assessment and Baseline Study for Ethiopia, Nairobi, Kenya. 25. Stock, J. H. and Watson, M. W. 1993. A Simple Estimate of Co-Integrating Vector in Higher Ordered Integrated Systems, Econometrica, 61(4): 783-820. 26. Tamru, S. 2013. Spatial Integration of Cereal Markets in Ethiopia. Ethiopia Strategy Support Program - Ethiopian Development Research Institute, Addis Ababa, Ethiopia. 27. The Food and Agriculture Organization (FAO). 2015. FAOSTAT Production Database. Retrieved 05/11/2015, http:/faostat3.fao.org/download. 28. Toda, H. Y. and Yamamoto, T. 1995. Statistical Inference in Vector Auto-Regressions with Partially Integrated Processes. J. Econ. 66:225–250. 29. Tripathi, A. 2008. Estimation of Agricultural Supply Response Using Co-Integration Approach. Indira Gandhi Institute of Development Research, Mumbai. 30. Ulimwengu, J. M., Workneh, S. and Paulos, Z. 2009. Impact of Soaring Food Price in Ethiopia: Does Location Matter? IFPRI. 31. United States Department of Agriculture (USDA). 2015. Commodity Database. Available: http://apps.fas.usda.gov/psdonline/psdquery.aspx [2015, 24 November].