Spatial price transmission between white maize grain markets in Mozambique and Malawi

Abstract

The objective of this study was to measure white maize grain price transmission among markets in Mozambique and Malawi. Our analysis included two major deficit markets (Maputo in Southern Mozambique and Blantyre in Southern Malawi) and two major surplus markets (Chimoio in Central Mozambique and Nampula in Northern Mozambique). We used monthly wholesale white maize grain prices covering the period 2000 through 2016 to test for and quantify the magnitude of short- and long-run price transmission. To do so, we employed a combination of methodological approaches: Johansen cointegration test, Granger causality test and error correction model (ECM). Our findings revealed that Chimoio market has joint long-run relationship with Maputo, Nampula and Blantyre markets. All three Mozambique market pairs (Maputo and Chimoio; Maputo and Nampula; and Chimoio and Nampula) exhibited bidirectional causality in the long run. However, price changes in Maputo, Chimoio and Nampula are transmitted to Blantyre, but not the reverse. In the short run, only two Mozambique market pairs (Maputo and Chimoio, and Chimoio and Nampula) show bidirectional causality. Blantyre appeared to not exhibit short-run causality with Maputo, Chimoio nor Nampula. Key words: Market integration, white maize grain, causality, price transmission