Abstract

This work aims to study the integration of papaya market, price transmission and price causality patterns with the help of Johansen co-integration test, vector error correction model and Granger causality test using 13 years average monthly prices of papaya.  Johansen co-integration tests indicate that four papaya markets significantly co-integrated with each other. Vector error correction (VEC) model test indicates that speed of papaya price adjustment for Arbaminch market was statistically significant at 1% level and the fastest compared to other payaya price adjustment. Its equilibrium price was stable. Whereas, speed of price adjustment for Adama market was insignificant and the slowest as compared to other market prices; its equilibrium was unstable because price change was away from equilibrium price. This implies that there was asymmetric information. The Granger causality test indicates that Arbamnch papaya price had bidirectional relationships with Merkato and Shashemenie markets.  Concerned bodies should work on asymmetric information to address slow price adjustment between various papaya markets.

Key words: Market integration, papaya, vector error correction model, Granger causality.