Threshold Effects and Asymmetric Price Adjustments within the Ghanaian Maize Market

Abstract

This study investigated co integration and asymmetric adjustments in the end equilibrium between Ghanaian retail and wholesale maize markets using the Enders and Siklos technique. Two competing models, namely Consistent Threshold Autoregressive (C-TAR) and Consistent Momentum Threshold Autoregressive (C-MTAR) models were estimated. Following the application of a standard model selection technique, CMTAR model is selected as most appropriate. The results of the C-MTAR model confirm that the retail and wholesale prices of maize in Ghana are co integrated with threshold adjustment. Furthermore, it suggests that the process is asymmetric when the retail and wholesale prices of Ghanaian maize adjust to achieve the longterm equilibrium. Additionally, the adjustment is relatively faster when the price differential is increasing than when it is decreasing.