Long and short-run price integration analysis of rice marketing in Kwara State, Nigeria

Abstract

This study examined the long and short-run analysis of rice marketing in Kwara State, Nigeria. Time series data on the retail prices of rice were collected for a period of 60 months (2006-2010) to test for the long linear equilibrium relationship as well as the speed of price transmission between selected markets in the State. The test procedures involved the Augumented Dickey Fuller test to detect the presence of unit root in the series; Johansen co-integration test for the long run equilibrium relationship among the variables; vector error correction model test (VECM) to capture short-run and long-run changes in the price movements; and Granger casualty test to reflect the direction of influence between prices. The results revealed that stationarity in the price series was eliminated after the first differencing and that there was a stable long-run equilibrium relationship among the markets. The vector error correction estimates shows that most of the markets were not well integrated in the short –run, and finally, the causality test revealed that no single market dominated the price formation either in the rural or urban markets in the study area.