Analysis of intra-region market integration and spatial price transmission in groundnut markets in Malawi

Abstract

ABSTRACT Agricultural marketing has overwhelmingly received policy reforms indeveloping countries, Malawi included. In response to these policyreforms, extensive research on market cointegration has been conducted in evaluating the market performance of various agricultural commodities. In Malawi, literature on groundnut market cointegration is scanty. This study was aimed at understanding price co-movement in groundnut markets in Malawi. Agricultural Market Information System (AMIS) data on groundnut prices from 2005 to 2018 were used. The Vector Error Correction Model was used to analyse the extent of market cointegration, both in the long and the short run. The speeds of adjustments in groundnut markets were found to be very slow. It takes long for the systems to revert back to equilibriums in the long run. In all regions, very few markets are cointegrated. Although the speed of adjustment is slow in most of the cointegrating vectors, Southern region markets depict the fastest speed of adjustment towards long run equilibrium. Irrespective of the speed of adjustment, more markets are cointegrated in northern and central regions than in the southern region. Relevant policies are needed that promote smooth flow of information from surplus to deficit areas. Market infrastructure is also needed in the country.