Epsilon Archive for Student Projects

Abstract

This study investigates how the Ethiopian sesame seed export market is integrated to selected reference markets in China and the US. Cointegration and vector error-correction model (VECM) are employed using monthly data over the period 2010 to 2018. The empirical findings indicate that the Ethiopian sesame seed export market has a long-run equilibrium relationship with the Chinese sesame oil, the Chinese soybean import and the US soybean domestic markets. Market shocks with in the first two reference markets have permanent effects on the Ethiopian export price in the long run, while the latter has a transitory effect. Furthermore, the Ethiopian sesame seed export market has a price adjustment speed of 12% in the integration process implying that it takes less than nine months to restore to the long-run equilibrium after a shock. There is also a strong evidence of a short-run price transmission from the Ethiopian sesame seed export price to the Chinese sesame oil domestic price. Overall the empirical findings indicate the presence of market integration, but with asymmetric price transmissions across the markets.