An application of the von Cramon-Taubadel and Loy error correction models in analyzing asymmetric adjustment between retail and wholesale maize prices in Ghana

Abstract

Previous studies analyzing asymmetric price transmission have been based on an econometric specification that is
shown to be inconsistent with cointegration. This study draws on the concept of cointegration to implement the von
Cramon-Taubadel and Loy error correction approach in analyzing retail-wholesale maize price transmission in Ghana.
Asymmetries are modeled to affect the direct impact of price increases and decreases as well as adjustments to the
equilibrium level. The analysis demonstrates that transmission between retail and wholesale maize prices in Ghanaian
maize market is asymmetric. In accordance with common belief, retailers react more quickly to increasing wholesale
prices than decreasing wholesale prices.