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Test for Asymmetry Price Relationship in Nigerian Cocoa Market


Affiliations
1 Department of Agricultural Economics and Management, University of Swaziland, Swaziland
 

Objective: To investigate the degree of asymmetry in the relationship between world price of cocoa and the local exporting firms’ prices.

Methods: A Generalized Least Square Momentum Threshold Autoregressive (GLS MTAR) model was employed in the analysis of the data. The properties of the model are more significant in power when compared with the Engle and Granger symmetric test or the co-integration model developed by Ender and Siklos.

Findings: The main result show that a rise in the world price might lead to slower rise in cocoa exporting firm prices in Nigeria, while a decline in the world prices might cause a rapid fall in the exporting firms prices.

Application: The results suggest that there exists inherent competition among cocoa exporting firms in Nigeria who now interface between cocoa farmers and importers. At present therefore, the liberalization of the market could be said to be a right step in the right direction.


Keywords

Cocoa Prices, Co-Integration, GLS MTAR, Asymmetric Price Adjustment.
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  • Test for Asymmetry Price Relationship in Nigerian Cocoa Market

Abstract Views: 240  |  PDF Views: 123

Authors

J. O. Ajetomobi
Department of Agricultural Economics and Management, University of Swaziland, Swaziland
D. V. Dlamini
Department of Agricultural Economics and Management, University of Swaziland, Swaziland

Abstract


Objective: To investigate the degree of asymmetry in the relationship between world price of cocoa and the local exporting firms’ prices.

Methods: A Generalized Least Square Momentum Threshold Autoregressive (GLS MTAR) model was employed in the analysis of the data. The properties of the model are more significant in power when compared with the Engle and Granger symmetric test or the co-integration model developed by Ender and Siklos.

Findings: The main result show that a rise in the world price might lead to slower rise in cocoa exporting firm prices in Nigeria, while a decline in the world prices might cause a rapid fall in the exporting firms prices.

Application: The results suggest that there exists inherent competition among cocoa exporting firms in Nigeria who now interface between cocoa farmers and importers. At present therefore, the liberalization of the market could be said to be a right step in the right direction.


Keywords


Cocoa Prices, Co-Integration, GLS MTAR, Asymmetric Price Adjustment.

References