The Future of Smallholder Farming in Eastern Africa - Uganda ...

model depends on whether or not the analyst believes the series is trended. It is expected that
maize price series are trended, but we include the results of the nontrended model for
comparison. Thus the equations estimated were:
+ m
i, − 1 ∑ = n
m = 1
α +
i, t − U (4)
t
Δ P =
i, t α + 0 δ 1 P t
Δ P =
i, t α + 0 δ 1 Pi t 1
, − + ∑ = =
m P m
Δ
m n
m 1 α m ΔP +
i, t −m
β 1 T + U (5)
t
The values reported in Table 6a show that most of the regressions with and without trend are
of the order zero of augmentation (p in the tables) while Nairobi (with trend) is of order one
and Migori (with trend) of order two. Table 6b shows that the postliberalization Kiritiiri
series without trend is of order one. Nairobi and Kitale series with and without trend are are
of order two. All other regressions are of order zero. The order of augmentation was
determined by using combinations of three criteria: Akaike’s information criterion (AIC),
Schwarz Bayesian criterion (SBC), and Hannan-Quinn criterion (HQC). All ADF statistics,
except in the case of Kiritiri, are (in absolute value) below their asymptotic 95 percent critical
values given in the last two rows of Tables 6a and 6b. It is therefore not possible to reject the
null hypothesis of unit roots in the price level series at the 5 percent significance level.
Considering the results in Table 6a, it was observed that maize series were integrated of order
one--that is, I(1) in the preliberalization era. Similar tests for the postliberalization period
yield results similar to those of the preliberalization era except that the hypothesis of presence
of unit root is rejected for the Kiritiri price series (Table 6b). There is no reason to believe
that the Kiritiri price series is structurally different from the other price series, and therefore
we are compelled by caution to interpret all the price series as nonstationary--that is, not
integrated of degree zero.