Onion Market Integration: The Case Of Harar, Dire Dawa And Central Markets

Abstract

The objective of this study was to analyze the integration of onion market among the spatially separated secondary market to onion producers and the central market. Pearson correlation coefficient, unit root test, Co-integration test and Error correction model were employed to know linear relationship among these markets, non stationary or stationary series, OLS estimation for the long run relationship and short run relationship between these markets respectively. Monthly price series for a period of five years from September 2006 – August 2011 was used for the study. Accordingly, the result portrayed that, there is a strong relationship between the two secondary markets like Harar and Dire Dawa than central market. After conducting the DF/ADF test the residual from OLS estimation obey stationary and known that co-integration between the two regional markets to each other than the central market. From the ECM model, it was concluded that there is a slower adjustment of the system towards the equilibrium after a shock.

Keywords: Onion, market integration, stationary, spatial price transmission, unit root test, error correction model