Econometric Analysis of Asymmetric Price Transmission Using Threshold Cointegration Approach: A Case Study of Morocco’s Apple Markets
International Journal of Agricultural Economics
Volume 3, Issue 5, September 2018, Pages: 94-102
Received: Aug. 21, 2018;
Accepted: Sep. 14, 2018;
Published: Oct. 22, 2018
Views 530 Downloads 140
Ouahiba Elalaoui, Department of Rural Economy, National School of Agriculture, Meknes, Morocco
Abdelouafi Ibrahimy, Department of Rural Economy, National School of Agriculture, Meknes, Morocco
Aziz Fadlaoui, Regional Agricultural Research Center in Meknes, National Institute of Agricultural Research, Meknes, Morocco
Redouane Arrach, Strategy and Statistics Directorate, Ministry of Agriculture, Fisheries, Rural Development, Water and Forests, Rabat, Morocco
The level of market integration between deficit and surplus markets is a key determinant of price stability and food security. Thus, market integration can be regarded as a way of assessing efficiency of agricultural markets. The current study intends to investigate the domestic market integration and explore the potential presence of asymmetric price adjustments between spatially separated markets. The paper employs threshold cointegration approach using monthly data of wholesale apples prices over the period from September 1993 to June 2017 in five major wholesale markets in Morocco. Study findings suggest that wholesale apples markets are significantly cointegrated, implying the presence of the long-run equilibrium relationships between the examined markets pairs. Considering the evidence as a whole, for five out of eight market pairings, the results reveal that the nature of price transmission exhibits significant asymmetric adjustments. Nonetheless, the empirical analysis does not always support the research hypothesis, stipulating that deficit market prices adjust more swiftly to price increases than to price decreases in surplus market because of the market power of intermediaries in the food marketing chain. Based on these results, the domestic market integration shows some signs of weakness, which may affect the progress of the sector. In this respect, further efforts should be made to enhance market performance so as to ensure an even balance between the production and marketing segment.
Econometric Analysis of Asymmetric Price Transmission Using Threshold Cointegration Approach: A Case Study of Morocco’s Apple Markets, International Journal of Agricultural Economics.
Vol. 3, No. 5,
2018, pp. 94-102.
Ministère de l’Agriculture, de la Pêche Maritime, du Développement Rural et des Eaux et Forêts, 2016. «L’AGRICULTURE EN CHIFFRES 2016»
Ministère de l’Agriculture, de la Pêche Maritime, du Développement Rural et des Eaux et Forêts, 2014. « Note de veille : pomme »
Abdulai, A. 2000. “Spatial price transmission and asymmetry in the Ghanaian maize market” Journal of Development Economics. Vol. 63 (2), 327–349.
Ankamah-Yeboah, I. 2012. “Spatial Price Transmission in the Regional Maize Markets in Ghana.” Munich Personal RePEc Archive, MPRA Paper No. 49720.
Larvoe, N. 2015. “Integration Assessment of Regional Yam Markets in Ghana: A Spatial Price Analysis”. Master’s thesis, Swedish University of Agricultural sciences.
Meyer, J. and von Cramon-Taubadel, S. (2004). “Asymmetric Price Transmission: A Survey”. Journal of Agricultural Economics, vol. 55(3), 581-611.
Engle, R. F., Granger, C. W. J., 1987. “Co-integration and error correction: representation, estimation, and testing”. Econometrica, Vol. 55 (2), 251–276.
Johansen, S. (1988). “Statistical Analysis of Cointegration Vectors”. Journal of Economic Dynamics and Control, Vol. 12, 231–254.
Habte, Z. 2017 “Spatial market integration and price transmission for papaya markets in Ethiopia”. Journal of Development and Agricultural Economics, Vol. 9(5), 129-136.
Ahmad Beag, F. Singla. N. 2014 “Cointegration, Causality and Impulse Response Analysis in Major Apple Markets of India”. Agricultural Economics Research Review, Vol. 27 (No.2), 289-298.
Ghafoor, A. Mustafa, K. Mushtaq, K. Abedullah. 2009. “Cointegration and Causality: An Application to Major Mango Markets in Pakistan” The Lahore Journal of Economics, 14 (1), pp. 85-113.
Paul, U. K. Das, G. Debnath, A. Mathur, T. 2017. “Market Integration and Price Leadership in India’s Onion Market”. Review of Market Integration, 8(1&2) 49–64.
Peltzman, S. (2000). Prices Rise Faster than they fall, Journal of Political Economy, Vol. 108(3), 466-502.
Enders, W. Siklos, P. 2001. “Cointegration and threshold adjustment”. Journal of Business and Economic Statistics. Vol. 19, 166–176.
Abdulai, A. 2002. “Using Threshold Cointegration to estimate asymmetric Price Transmission in the Swiss Pork Market”. Applied Economics. Vol. 34, 679-687.
Kofi Blay, J. 2015. “Spatial Market Integration and Price Transmission of Important Crop Markets in Ghana”. Master of Science in Agriculture (Agricultural Economics).
Hassanzoy, N. Ito, S. Isoda, H. Amekawa, Y. 2016. “Cointegration and spatial price transmission among wheat and wheat-flour markets in Afghanistan”. Applied Economics.
Ilyasov, J. Götz, L. Akramov, K. T. Dorosh, P. Glauben, T. 2016. “Market Integration and Price Transmission in Tajikistan’s Wheat Markets: Rising Like Rockets but Falling Like Feathers?”. International Food Policy Research Institue.
Hylleberg, S., Engle, R. F., Granger, C. W. J. and Yoo, B. S. (1990). “Seasonal Integration and Cointegration”, Journal of Econometrics. Vol 44, 215-238.
Mendez Parra, M. 2015. “Seasonal Unit Roots and Structural Breaks in agricultural time series: Monthly exports and domestic supply in Argentina”. University of Sussex, Munich Personal RePEc Archive.
Franses, P. H. (1990). “Testing for seasonal unit roots in monthly data”. Erasmus University, Rotterdam.
Franses, P. H. 1991. “Seasonality, Non-Stationarity and the Forecasting of Monthly Time Series. International Journal of Forecasting”. Vol. 7, 199 – 208
Beaulieu, J. J. and Miron, J. A. (1993). “Seasonal unit roots and déterministic seasonal in aggregate U.S. Data”, Journal of Econometrics. Vol. 55, 305-328.
Perron, P. 1997. “Further evidence on breaking trend functions in macroeconomic variables”. Journal of Econometrics. Vol 80, 355-385.
Chan, K. S. 1993. “Consistency and limiting distribution of the least squares estimator of the threshold autoregressive model”. The Annals of Statistics. Vol. 21, 520–533.
Enders, W., and Granger, C. W. J. 1998. “Unit-root tests and asymmetric adjustment with an example using the term structure of interest rates”. Journal of Business & Economic Statistics. Vol. 16, 304-311.