Contemporary Price Trends and their Economic Significance in the Ashanti Region of Ghana

Abstract

The objective of this study was to examine the current trend in price of staples and the possible effect on income. Price volatility is explained by changes in the trend itself, and to a lesser extent by variation around its mean (historical volatility approach), which is based on observed past prices. This measure was adopted to gauge the variation in commodity price around the mean. The results show that although prices increased steadily over the years, volatility was relatively minimal between 2002 and 2006 as compared to the period after. Unlike the cereals, more than 50% of vegetables traded on the markets are imported from neighbouring countries. The price range for vegetables was thus much wider than cereals. Supply shortfalls and transportation cost were cited as the two most significant factors contributing to rising prices on the markets. The findings confirm theoretical evidence that unexpected increase in prices erode the purchasing power of consumers, especially the poor who spend much of their incomes on food. A consumer receiving the current minimum wage and spending everything on the respective commodities within one month lost substantially in terms of volumes purchased between 2006 and 2013. For instance, the quantity of tomatoes and maize purchased declined by 74% and 65% respectively between 2006 and 2007. The trend suggests that uncontrolled volatility in prices has serious effects on income and for that matter food security. Stakeholders need to target production increase and improved distribution systems as means to reduce price volatility, which will protect poor consumers against the challenge of coping with wide price variations.

Keywords: Price trend, volatility, income, coefficient of variation, standard deviation