Market Integration and Price Transmission of Maize in Ethiopia

In this study, we investigated the presence of predatory price adjustment practices in the grain market in Ethiopia by relying on data during the post-agricultural market liberalization period from July 2004 to March 2016. We employed an Asymmetric Error Correction (AECM) model to test the presence of Asymmetric Price Transmission (APT) between integrated wholesale regional maize markets. The results demonstrate that out of 14 regional maize market pairs with the central Addis Ababa maize market, APT is confirmed in only two regional wholesale maize markets of Mek’ele and Nekemete. Hence, the widely held belief by consumers and government that traders’ inappropriate price adjustment contributes to the persistence of soaring food prices in Ethiopia is just a misconception. It is argued in this study that the recent surge in maize price in Ethiopia has little to do with APT in maize market.