Working Paper 306 - Asymmetric Price Transmission of Rice in Togo

Tomgouani Lanie ()

Working Paper Series from African Development Bank

Abstract: In this paper, we investigate the extent and the speed of adjustment of six domestic markets of imported rice and the local market of processed rice to rice price changes on the global market and how local paddy markets respond to changes in processed rice prices in Togo and we test for asymmetry in the adjustment process using both standard and threshold co-integration analyses. We estimate symmetric and asymmetric error correction models with respect to the linear and threshold cointegration relationships to investigate the short-run price dynamics. The results indicate that prices of central–local market pairings are co-integrated with relatively low-price transmission elasticities. Threshold cointegration analyses reveal that, in the long run, the local paddy market adjusts asymmetrically to price changes for processed rice and the Cinkasse and Lome domestic markets adjust asymmetrically to price changes on the global market. In the short run, there is asymmetric adjustment only between global and imported rice price dynamics. The results imply that oligopolistic middlemen in rice marketing in Togo are more sensitive to—and react quickly to— rice price changes on the global market that squeeze their margins than to changes that stretch them.JEL classification: Q13; D43; C24. Keywords: Agricultural markets and marketing, Asymmetric price transmission, threshold cointegration, Togo.

Date: 2018-06-28
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