Measuring Market Integration in Mozambican Maize Markets: A Threshold Vector Error Correction Approach

The primary objective of this research was to measure the extent of market integration between major surplus and deficit maize markets in Mozambique namely, Chimoio-Maputo, Chimoio-Beira, Ribaue-Nampula, and Mocuba-Nampula. To achieve this objective, Threshold Vector Autoregressive models were applied. The choice of the model was motivated by unobservable transaction costs and the import ant influence that their presence may exert on equilibrium spatial price relationships. The following are some of the major findings of the study. Firstly, threshold values (i.e. estimates of transaction costs) are found to be correlated positively with distance and inversely with the condition of the roads connecting markets. Secondly, market integration analysis revealed that out of the four surplus and deficit market combinations studied, Chimoio- Maputo and Mocuba-Nampula market pairs are integrated. However, the degree of integration was found to be the strongest in the former. Finally, results from the impulse response suggested that deficit/surplus markets, in the integrated market combinations, are relatively more responsive to shocks emanating from surplus/deficit markets.Mozambique, market integration, maize market, transaction cost, threshold vector error correction, Crop Production/Industries, Marketing, C21, C22, D4, E3, Q13,

Measuring Market Integration in Mozambican Maize Markets: A Threshold Vector Error Correction Approach

The primary objective of this research was to measure the extent of market integration between major surplus and deficit maize markets in Mozambique namely, Chimoio-Maputo, Chimoio-Beira, Ribaue-Nampula, and Mocuba-Nampula. To achieve this objective, Threshold Vector Autoregressive models were applied. The choice of the model was motivated by unobservable transaction costs and the import ant influence that their presence may exert on equilibrium spatial price relationships. The following are some of the major findings of the study. Firstly, threshold values (i.e. estimates of transaction costs) are found to be correlated positively with distance and inversely with the condition of the roads connecting markets. Secondly, market integration analysis revealed that out of the four surplus and deficit market combinations studied, Chimoio- Maputo and Mocuba-Nampula market pairs are integrated. However, the degree of integration was found to be the strongest in the former. Finally, results from the impulse response suggested that deficit/surplus markets, in the integrated market combinations, are relatively more responsive to shocks emanating from surplus/deficit markets