Modelling Price Formation and Dynamics in the Ethiopian Maize Market

Abstract

This study is an attempt to examine price formation, and dynamics in the Ethiopian maize market. A single commodity partial equilibrium and the Johansen’s co-integration approaches were used to investigate maize price formation and market integration in the Ethiopian maize market. Findings from the maize industry outlook indicated that maize production is expected to grow for the forecasted period. An increase in maize production was, however, not enough to offset the growth on the demand side. From the yield simulation analysis, we found that a 20% increase in maize yield would reduce nominal maize price by 81%. Co-integration analysis indicated that the Ethiopian wholesale maize markets have become more efficient in the recent years suggesting that price related information is transmitted more efficiently across consumption and production wholesale maize markets.