AO Ojo*, MA Ojo, CA Adebayo and AAA Coker
Department of Agricultural Economics and Extension Technology, Federal University of Technology, P.M.B. 65, Minna, Niger State
Abstrsact
This study examined the integration of rural and urban markets in Niger State using the Error
correction Modeling. Secondary data of the retail prices of rice were collected for a period of
60 months (2006-2010) and error correction technique was employed in the determination of
the degree of market integration between the markets using a four test procedures viz: Augumented
Dickey Fuller test to detect for the presence of unit root in the series; Johansen cointegration
test for the long run equilibrium relationship among the variables; Vector error
correction model test (VECM) to capture short-run and long-run changes in the price
movements; and Granger casualty test to reflect the direction of influence between prices. The
results revealed that unit root in the price series was eliminated after the first differencing and
that there was a stable long-run equilibrium relationship among the markets. The vector error
correction estimates shows that most of the markets were not well integrated in the short-run,
and finally, the causality test revealed that no single market dominated the price formation
either in the rural or urban markets in the study area. Therefore, to improve the rate of spatial
price adjustment in the study area, policy makers should intensify their efforts on improving
the functioning of rice markets through increasing marketers’ access to accurate and timely
marketing information as well as reduction of the prices of mobile phones to make it more
affordable to the marketers so as to improve the degree of integration of the markets in the
study area.
Key words: Integration, rice markets, vector error correction
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* - Corresponding Author
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