Spatial Price Transmission of Maize Grain Prices among Markets in Kenya, Tanzania, and Uganda: Evidence from the Nonlinear ARDL Model

Abstract

Despite the commercial links that exist among Tanzania, Kenya, and Uganda, with maize as the most heavily traded agricultural commodity, there is a deficiency in the empirical literature on the price transmission of maize or any other traded agricultural commodity among these countries. This study attempts to fill this gap in the literature by examining the spatial price transmission of wholesale maize grain prices among these countries using the Nonlinear ARDL model. The empirical results indicate that there is no statistically significant relationship between wholesale maize prices in Uganda and those in Tanzania. However, a 1% increase (decrease) in wholesale maize prices in Kenya leads to a 0.8943% (0.7363%) increase (decrease) in wholesale maize prices in Uganda. Similarly, a 1% increase (decrease) in wholesale maize prices in Kenya leads to a 0.6079% (1.1752%) increase (decrease) in wholesale maize prices in Tanzania. On the other hand, a 1% increase (decrease) in wholesale maize prices in Uganda leads to a 0.5652% (0.6487%) increase (decrease) in wholesale maize prices in Kenya, while a 1% increase in wholesale maize prices in Tanzania leads to a 0.3635% increase in wholesale maize prices in Kenya. These findings are relevant for the development of strategies to improve market conditions and enhance growth in trade among the three countries.