n Ghanaian Journal of Economics - Commodity-specific spatial integration : inter-commodity integration and substitution between maize and sorghum in Ghana

Volume 2, Issue 1
  • ISSN : 2309-8945



The main objectives of the study are; (1) to test for spatial integration of sorghum and maize: (2) to test inter-commodity integration, and (3) to test the existence and extent of substitution between sorghum and maize. The study used monthly real prices of sorghum and maize from 2006 to 2013. The Johansen approach is used to test for specific commodity spatial integration whilst the Bounds approach is used to test inter-commodity integration and substitution between sorghum and maize. The result showed that the sorghum and maize markets are spatially integrated. We found multiple market leaders both in the sorghum and maize markets, and that indicates simultaneous determination of prices in these markets. While the sorghum market provides arbitrage opportunities, we found that arbitrage opportunities in the maize market depend on the trade network established. The result also confirmed the existence of inter-commodity integration both in the long-run and short-run. Estimated half-life persistence indicators showed that markets are integrated to different degrees. Lastly, the result showed significant short-run and long-run substitution between sorghum and maize, but this is not perfect.

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