Spatial Integration of Groundnut Markets in Zambia: Application of Co-integration and Vector Error Correction Model

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Spatial Integration of Groundnut Markets in Zambia: Application of Co-integration and Vector Error Correction Model

Abstract

In Zambia, there are persistent shortages in the supply of groundnuts in certain regions, despite the major producing areas of Eastern and Northern provinces having significant surpluses. This is an indication for market inefficiency. Thus, this study assessed market integration and price transmission of groundnuts among geographically separated groundnut markets using co-integration and vector error correction model (VECM). It employed monthly retail groundnut price data from January 2001 to March 2017. The Augmented Dickey-Fuller and Kwiatkowski Philips Schmidt Shin tests both showed that Chipata, Chadiza, Petauke and Kasama were non-stationary at level, meaning that the prices in these markets had a unit root process. Lusaka and Kitwe were stationary at level. After the first difference, all the markets were stationary.

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