Spatial price transmission and asymmetry in the Ghanaian maize market

Abstract

This paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long-run equilibrium relationship to examine price linkages between principal maize markets in Ghana. Unlike previous studies, the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold, whereby the benefits of this adjustment exceed the costs. The findings indicate that major maize markets in Ghana are well integrated. Both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets (Accra and Bolgatanga) respond more swiftly to increases than to decreases in central market (Techiman) prices. Accra prices are found to react faster than Bolgatanga prices to changes in Techiman market prices.