CO-INTEGRATION AND VECTOR ERROR CORRECTION MODELS ANALYSIS OF PRODUCER PRICES OF CASSAVA, RICE AND MAIZE

Olajide, Oyebisi Olatunji

Department of Agricultural Economics, University of Ibadan, Ibadan Nigeria.

*Corresponding Author’s Contact Details: Email address ✉: bislaj05@gmal.com, Phone No ☎: +2348063316255

Accepted December 22, 2019

This study analyzed the relationship among producer prices of cassava, rice and maize in Nigeria. The study used annual time series data spanning from 1991 to 2013. Results from Augmented Dickey Fuller test showed that the time series data were not stationary in their level forms but were integrated of order one, 1. The trace test and maximum Eigen values of Johansen co-integration test indicated 3 co-integrations at the 5 percent level which showed there is a long run relationship among the variables during the period of study. The result of the VECM showed the Maize producer price responded faster than the Cassava and Rice prices. The adjustment coefficient was not statistically significant for the three selected producer prices suggesting that the Cassava and Rice prices are strongly exogenous. This implies that movement in Cassava and Rice prices was highly affected by price in Maize while movement in price of Maize was dictated by events in cassava and rice prices. This means that the long run equilibrium in the producer prices after exogenous shock is restored primarily by corrections made by producer prices of maize. Granger causality showed that cassava producer price determined the producer prices of rice and maize which indicated a unidirectional causality. Producer prices of rice and maize neither granger caused each other. Hence, the null hypothesis that the producer price does not granger cause each other is rejected. Therefore, price policy in favour of cassava cultivation should be promoted.

Key words: Co-integration, VECM, Granger Causality, Producer Price, Maize, Cassava, Rice.

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