The process of short- and long-term price integration in the Benin maize market

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Abstract
This paper reviews the methodology used to study the price integration process in spatially separated spot markets, and applies it to the Benin maize market. An Autoregressive Distributed Lag Model is derived to take into account the sluggishness of price adjustments. Hypothesis testing concerns stationarity and both long- and short-run integration of the price series. Long-term integration is tested with co-integration analysis. Error correction models are used to test for short-run integration and to estimate the speed of price adjustment. It is concluded that the arbitrage system is functioning, but with a significant time lag for several markets. This implies that there is scope for improving market performance.

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