Asymmetric price Transmission of the Groundnut market in Ethiopia. A NARDL Approach

Abstract

Alihasen Yacob and Negussie Zeray

Assessing market integration is essential for understanding the impacts of market expansion and liberalization initiatives. This research aims to analyze the spatial price transmission and market integration of significant groundnut markets in Ethiopia, utilizing monthly retail price data from September 2000 to August 2022. A combination of descriptive and econometric methods was employed for the analysis. The descriptive statistics indicated that consumption areas exhibited the highest nominal mean prices, with Dire Dawa and Addis Ababa reporting ETB29.89 and ETB28.69 per kilogram, respectively, whereas the producing regions showed the lowest average prices for groundnuts. The Augmented-Dickey Fuller test was used to test for the stationarity of individual price series and was confirmed by the KPSS test. All the price series data that were used tested for Unit Root. They were found to be non-stationary at levels but stationary after first difference at 1%, 5% and 10% significant levels. Johansen Co-integration test was used to test for long- run relationships between the market pair. It was found that all six market pairs were cointegrated at 5% level of significance. The Non- linear Auto Regressive Distributed Lag Model shows asymmetric price transmission in two market pairs, indicating quicker adjustments to price increases than decreases. The study implys the influence of geographical differences, distance, and production volume on market integration. This study provides significant contributions to the formulation of agricultural marketing policies and deepens our comprehension of market dynamics in Ethiopia.

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