BEEF CATTLE MARKET INTEGRATION ANALYSIS: THE CASE OF MEKELE CITY, TIGRAY REGIONAL STATE, ETHIOPIA

Abstract

This study examines the level of integration between the beef cattle markets in Mekele City in Tigray regional state. The study employs Vector Error Correction Model (VECM) for analyzing the relationship among the aforementioned markets. Nine year series of monthly observations from July 2008 to 2016 were used. Unit root tests of the series in study reveal that all the series are non-stationary at level and stationary after first differenced. The result from Johansen test indicates the existence of two co-integration relation between the variables. Granger causality test indicates that there is transmission of price signals among all beef cattle markets. The garanger causality results also shows that except for Adigudem and Wukro beef cattle market; where the movement in between the two markets was found to be bi-directional. The results from the vector error correction model revealed that the co-integrating coefficient being close to 1 which satisfies and served as a strong evidence of the law of one price. Besides, about 40% and 1 % of disequilibrium corrected for each month in both Mekele and Wukro markets respectively were by changes in their own prices and the remaining influenced by other internal and external market forces. The speed of adjustment of 74.3 % and 2.3 % were recorded from the short run to the long run equilibrium in both Adigudem and Hewane. The study recommends that to restore and emplace efficiency, there has to be upgrading efforts to be made in creating conducive environment to make the markets well integrated and a means to ease the beef cattle transaction system in the country