Journal of Agricultural Economics and Development Vol. 4(2), pp. 021-029, February 2015 ISSN 2327-3151 ©2015 Academe Research Journals

Full Length Research Paper

Onion market integration: The case of Harar, Dire Dawa and Central Markets

Dereje Regasa¹* and Lemma Zemedu²

¹Ministry of Agriculture, P.O. Box 62347, Addis Ababa, Ethiopia.

²Haramaya University, P.O. Box 138, Dire Dawa, Ethiopia.

*Corresponding author. E-mail: derrgs03@gmail.com.

Accepted 3 December, 2014

Abstract

The objective of this study was to analyze the integration of onion market among the spatially separated secondary market to onion producers and the central market. Pearson correlation coefficient, unit root test, Co-integration test and Error correction model were employed to know the linear relationship among these markets, non stationary or stationary series, OLS estimation for the long run relationship and short run relationship between these markets respectively. Monthly price series for a period of five years from September 2006 – August 2011 was used for this study. Accordingly, the result portrayed that there is a strong relationship between the two secondary markets like Harar and Dire Dawa than the central market. After conducting the Dickey-Fuller/Augmented Dickey-Fuller (DF/ADF) test, it was observed that the residual from OLS estimation was stationary and that the co-integration between the two regional markets to each other was known other than the central market. From the ECM model, it was concluded that there is a slower adjustment of the system towards the equilibrium after a shock.

Key words: Onion, market integration, stationary, spatial price transmission, unit root test, error correction model.