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Russian Journal of Agricultural and Socio-Economic Sciences, No. 8 (8) / 2012TAR is set at 0. While the competing thresholdcointegration models have similar results (table2), the consistent TAR model has the lowest AICstatistic of 1908 and BIC statistic of 1930, andtherefore, is deemed to be the best. Focusing onthe results from the consistent TAR model, thisstudy finds that the F-test for the null hypothesisof no cointegration has a statistic of 18.371 and itis highly significant at the 1% level. Thus, theretail and wholesale prices of maize in Ghana arecointegrated with threshold adjustment.Table 2 – Estimates of the speed of adjustments parameters of the Threshold Modeln/n Threshold Autoregressive Model (TAR) Consistent Threshold Autoregregressive Model (CTAR)3 -0.12057(-4.517)* -0.11202(-4.5671)*3 -0.14732(-3.948)* -0.19787(-4.327)*3 = 3 17.081(0.000)** 18.371(0.000)**3 = 3 < 0.354(0.550)** 2.779(0.096)** 0 -2.554SSE 1197.313 1191.693AIC 1911 1908BIC 1932 1930Notes: * Values in the parentheses are t values. ** Values in the parentheses are estimated probability values; outside parenthesesare the F statistic values. Source: Author’s calculation.Furthermore, the F statistic for the null hypothesisof symmetric price transmission has avalue of 2.779 and it is also significant at the10% level. Therefore, the adjustment process isasymmetric when the retail and wholesale pricesof Ghanaian maize adjust to achieve the longtermequilibrium.The point estimate for the price adjustmentis -0.11202 for positive shocks and -0.19787 fornegative shocks. The point estimate of 3 (-0.11202) for the retail and wholesale prices indicatesthat approximately 11.2 % of a positivedeviation from the long-run equilibrium relationis eliminated within a week. Alternatively, thepoint estimate of 3 (-0.19787) indicates that19.8 % of a negative deviation from the long-runequilibrium relation is eliminated within a week.In effect, the adjustment is almost 1.7 times fasterfor negative deviations from equilibrium than forpositive deviations. Therefore, there is substantiallyfaster convergence for negative (belowthreshold) deviations from long-term equilibriumthan positive (above threshold) deviations.Model estimation results suggest that theConsistent TAR model detects asymmetry whilstTAR model fails to support this evidence. Theseresults imply that differences in inferences arepossible depending on weather the threshold parameteris estimated from the data or imposed bythe researcher.CONCLUSIONThis study estimated the price transmissionin the Ghanaian maize market using retail andwholesale prices. Specifically, the study testedfor the order of integration of the price series andanalyzed asymmetric adjustment using thresholdcointegration methodology. The threshold cointegrationtechnique makes it possible to test forcointegration without maintaining the hypothesisof a symmetric adjustment to a long-term equilibrium.The results of the KPSS test show that theretail and wholesale prices are non stationary andintegrated of the order one. The retail and wholesaleprices of maize in Ghana are cointegratedwith threshold adjustment. The Enders and Silkos(2001) procedure provides support for the alternativehypothesis of asymmetric adjustment. Thefindings of this study indicate that there is a fasterconvergence for negative deviations from longtermequilibrium than positive deviations. Theseresults suggest that price increases tend to persistwhereas decreases tend to revert quickly towardsequilibrium.Furthermore, alternative threshold modelingapproaches leads to differences in conclusion. Itis recommended that CTAR be used togetherwith the TAR and the cause of the positiveasymmetry identified be investigated.24
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Page 7 and 8: SULTANA NAYEEM, University of Dhaka
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