Measuring Vertical Price Transmission In A Deregulated Ethiopian Coffee Marketing Chain: Tvec Approach

Course ID
Ethiopian Economics Association (EEA)
Tadesse Kuma Worako

Ethiopia’s coffee industry has undergone numerous structural changes and deregulation measures as a result of changes in the political and economic situation of the country since early 1992. Such changes may have an influence on price transmission, dynamics of shocks through marketing channels, and the performance of the industry. The principal questions addressed by the study are whether the deregulation of the Ethiopian coffee market has resulted in closer interrelationships among producer, auction and world prices in the vertically related coffee marketing system. The study uses monthly price data for the period September 1992 to October 2006. The study employed multivariate Threshold Vector Error Correction Model (TVECM) by extending Hansen (1999) approach. As results indicate, market deregulation in general has induced strong long-run interrelationship between vertically related markets. However, regarding the extent of dynamic interrelation among prices, auction prices are found more responsive and directly affected by world prices while producer prices are affected by world prices indirectly through auction prices or no direct interrelationship detected between producer and world price. That is, after two and half decades of market reform efforts, producer markets are found to be segmented from world market. Hence dismantling market parastatals and deregulation is a necessary but not sufficient condition for efficient private markets to evolve. In the absence of appropriate infrastructure and institutions at the grassroots level, smallholders remain at the mercy of traders and goals of poverty reduction will remain to be a simple dream

Corporate Author: Getnet Alemu (Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: Ethiopian Economic Association (EEA)
ISBN/ISSN: 978-99944-54-10-5
Primary Descriptors: Coffee, price transmission

Secondary Descriptor: threshold vector error correction model

Geographic Descriptors: Ethiopia
Cataloge Date: 02/27/2013
Broad Subject heading: nonlinearity, price asymmetry
Call Number: 330.963 PRO 2009
Serial Key Title: Proceedings of the Sixth International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Volume: I
Publication date: 2013-05-27 23:09:00
Forum or Discussion date: 2013-02-27 15:02:18
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Author: Tadesse Kuma Worako, Van Schalkwyk, HD, et al.