market interactions between farm-raised .. and wild...

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Market Interactions between Farmand Wild-Harvested African Catfish in Uganda

Prof. James O. Bukenya and Maurice Prof. James O. Bukenya and Maurice

Market Interactions between Farm-Raised Harvested African Catfish in Uganda

Bukenya and Maurice SsebisubiBukenya and Maurice Ssebisubi

Presentation Outline: Presentation Outline:

Introduction Objectives Methodology

Dr. James O. Bukenya

Methodology Results

�The analysis contributes to the unsettled issue relating to the

competition between farm-raised and wild

Introduction

competition between farm-raised and wild

� overfishing overfishing of wild stock of wild stock coupled with the coupled with the variety of aquaculture products on the market could lead to variety of aquaculture products on the market could lead to aquaculture products competing more directly with wildaquaculture products competing more directly with wildharvested fish harvested fish speciesspecies

�� Catfish has become an important traded species in Uganda, with Catfish has become an important traded species in Uganda, with


�� Catfish has become an important traded species in Uganda, with Catfish has become an important traded species in Uganda, with exports to regional markets rising even faster than productionexports to regional markets rising even faster than production

to the unsettled issue relating to the

raised and wild-harvested fish species.raised and wild-harvested fish species.

coupled with the coupled with the expansion of a wide expansion of a wide variety of aquaculture products on the market could lead to variety of aquaculture products on the market could lead to aquaculture products competing more directly with wildaquaculture products competing more directly with wild--

Catfish has become an important traded species in Uganda, with Catfish has become an important traded species in Uganda, with Catfish has become an important traded species in Uganda, with Catfish has become an important traded species in Uganda, with exports to regional markets rising even faster than productionexports to regional markets rising even faster than production

Introduction Cont.

Price is the primary mechanism by which various stages of a

�� One of the key concerns when dealing with One of the key concerns when dealing with

how markets respond to each other is how markets respond to each other is

whether they adjust whether they adjust symmetricallysymmetrically

asymmetricallyasymmetrically..


market are linked.


The manner in which negative and positive


One of the key concerns when dealing with One of the key concerns when dealing with

how markets respond to each other is how markets respond to each other is

symmetricallysymmetrically or or


positive price shocks are transmitted

� A common belief is that

Introduction Cont.

� A common belief is that between different stages in the market chain is not symmetric.

�This means that the positive and negative price shocks between the two stages may not transmitted in the same way.


transmitted in the same way.

belief is that price transmission belief is that price transmission between different stages in the market chain is not symmetric.

means that the positive and negative price shocks between the two stages may not transmitted in the same way.transmitted in the same way.

The concept of asymmetric price tr

Example: Example:

Consider a situation when:

� increases in wholesale catfish prices lead to immediate prices lead to immediate increases in retail catfish prices, but decreases in wholesale catfish prices take time to be passed down to retail prices. This asymmetry is referred to as This asymmetry is referred to as

time/speed asymmetrytime/speed asymmetry

� An increase in pin takes two periods (t1 and t2) to be fully transmitted to pout .

� The corresponding transmission of a decrease in pin is asymmetric with respect to both speed and magnitude because it requires three periods (t1, t2 and t3) and is not full.

ransmission

� We can have a combination of the time asymmetry time asymmetry and the size size

asymmetry asymmetry (i.e., a situation asymmetry asymmetry (i.e., a situation when increases in wholesale prices lead to bigger changes (in absolute values) in retail prices than decreases).

AsymAsym. price transmission (combination). price transmission (combination)

Asymmetric Price Transmission is important from the welfare point of view.

The concept of asymmetric price tr

welfare point of view.

� One must remember that APT implies a welfare redistribution from agents downstream to agents upstream (presumably consumers to

� It has serious political and social consequences.� It has serious political and social consequences.

Asymmetric Price Transmission is important from the

ransmission

must remember that APT implies a welfare redistribution from agents downstream to agents upstream (presumably consumers to fish trader);

has serious political and social consequences.has serious political and social consequences.

Objectives:

Determine whether price movement in Determine whether price movement in the farmthe farm--raised and wildraised and wild--harvested harvested the farmthe farm--raised and wildraised and wild--harvested harvested catfish markets share a common longcatfish markets share a common longrun relationshiprun relationship

Determine if the response of price Determine if the response of price shocks are symmetric or asymmetricshocks are symmetric or asymmetric


Determine the time path needed Determine the time path needed for shocks to be transmitted from for shocks to be transmitted from one market channel to the other.one market channel to the other.

Determine whether price movement in Determine whether price movement in harvested harvested harvested harvested

catfish markets share a common longcatfish markets share a common long--

Determine if the response of price Determine if the response of price shocks are symmetric or asymmetricshocks are symmetric or asymmetric

Determine the time path needed Determine the time path needed for shocks to be transmitted from for shocks to be transmitted from one market channel to the other.one market channel to the other.

Logarithmic Logarithmic price movement in the price movement in the

2006:012006:01--2013:082013:08

�� DataData

7.5

8.0

8.5

9.02006:012006:01--2013:082013:08

Source: Aquaculture Management Consultant

6.5

7.0

2006 2007 2008 2009

price movement in the price movement in the catfish catfish supply supply chain chain

2013:082013:08

Methodolog

y

Farmed-fish

Wild-harvested fish

2013:082013:08

9Aquaculture Management Consultant

2010 2011 2012 2013

� Purpose: analyze the statistical rel

Analytical procedure

Step 1: Unit root test

Step 2: Co-integration test

Step 3: Asymmetry test

10

When P1t

decreases

Asymmetry

type

When P1t

increases

elationships between the two prices

: Augmented Dickey-Fuller test: Augmented Dickey-Fuller test

: Phillips-Perron (PP) test

10

t

esMarket power Estimate

ADF and PP tests were conductseries are non-stationary and I(1

Unit root test

Market ADF test

Levels First Differences

Farm-raised -0.835[1] -13.695[0

** Represents significance at 0.05 level with critical

Wild-harvested -0.396[2] -10.830[1]**

[ ] represents lags while ( ) represents bandwidth

cted and found that the 1)

PP test

First Differences Levels First Differences

0]** -0.806(6) -16.511(9)**

level with critical values = -2.895 11

]** 0.185(82) -24.904(89)**

[ ] represents lags while ( ) represents bandwidth

Analytical procedure

Step 1: Unit root test

Step 2: Co-integration test

Step 3: Asymmetry test

12

When P1t

decreases

When P1t

increases

: Augmented Dickey-Fuller test

:TAR / M-TAR model

: Augmented Dickey-Fuller test

: Phillips-Perron (PP) test

12

t

esMarket power Estimate

(1) TAR model

t 1 I t t 1

(2) M-TAR model

T

i 1t 1t(1 I )2

T

Co-integration and asymmetry test

H0: ρ1=ρ2=0

is tested by Φ test.

Co-integration test

T

i 1t 12 (1 M t )1M t t 1t

*Critical values are given

by Enders & Siklos (2001)

|ρ

Posi

t 1

t 11 if

0 iftI

t 11 ifM

tt ii

t

t 1

t 11 if

0 iftM

H0: ρ1=ρ2

is tested by F test.

Asymmetry test

tt ii

If H0 rejected

ρ1| < |ρ2|

itive asym.

|ρ1| > |ρ2|

Negative asy1m2 .

Threshold Co-Integration Results

Model τ 1ρ

TAR 0.132 -0.821** -0.291**

M -TAR 0.154 -0.946** -0.358**

Hypothesis Test:

1. Co-integration— H0: ρ1=ρ2=02. Asymmetry – H0: ρ1=ρ2

3. Type of asymmetry – |ρ1| > |ρ2|

** represents significance at the 0.05 level: The critical values

Decision: If H0 rejected

� Threshold Co-integration

� Asymmetry

� Negative asymmetry

3. Type of asymmetry – |ρ1| > |ρ2|

2ρ 21 ρρ = 021 == ρρ Lag

0.291** 7.936** 10.739** 3

0.358** 6.760 10.063** 3

14values are presented in Enders & Siklos (2001).

tttf

t IeIP 121110 )1(ρρα −++=∆ −

The Asymmetric Error-Correction Model (AECM)

tttt IeIP 121110 )1(ρρα −++=∆ −

tttw

t IeIP 221210 )1(ρρβ −++=∆ −

� 11ρ and 12ρ represent the speed of adjustment coefficients of

equilibrium, respectively. � Similarly, ρ and ρ are the adjustment coefficients of � Similarly, 21ρ and 22ρ are the adjustment coefficients of

respectively � 00 and βα are constant terms,

� iii 21i21 and , , δδθθ are coefficients of lagged change terms

� and tt 21 and ζζ are white-noise disturbances.

t

pw

iti

pfitit PPe 1211) ξθθ +∆+∆+ ∑∑ −−−

Correction Model (AECM)

ti

itii

itit PPe 11

21

11) ξθθ +∆+∆+ ∑∑=

−=

−−

t

p

i

witi

p

i

fitit PPe 2

12

111) ξδδ +∆+∆+ ∑∑

=−

=−−

tment coefficients of ftP∆ if f

tP 1− is above and below its long-run

coefficients of ∆ for positive and negative discrepancies,

15

coefficients of wtP∆ for positive and negative discrepancies,

are coefficients of lagged change terms

Farm-Raised (

Variable Coefficient

Constant 0.024**

∆FP (-1) 0.057

∆FP (-2) 0.018

∆FP (-3) 0.027

∆WP (-1) -0.224*

TARTAR--AECM ResultsAECM Results

∆WP (-1) -0.224*

∆WP (-2) 0.031

∆WP (-3) -0.255**

+−1tZ -0.534**

−−1tZ -0.569**

Ho: Long-term asymmetry 4.093**

Ho: Long + Short- term asymmetry 3.553**

Ho: Short- term asymmetry 2.129*

F-statistic 3.883** F-statistic 3.883**

Correlogram of residuals 1.609

Breusch-Godfrey Serial Correlation Test 1.432

Heteroskedasticity Test: ARCH 1.687

Durbin-Watson Test 2.008

Akaike information criteria -1.502

Schwarz information criteria -1.251

Raised ( ∆FP) Wild-Harvested (∆WP)

Prob. Coefficient Prob.

0.041 0.032** 0.003

0.761 -0.106 0.540

0.901 -0.180* 0.100

0.872 -0.116 0.333

0.059 -0.249 0.142 0.059 -0.249 0.142

0.795 -0.377** 0.022

0.012 -0.160* 0.104

0.044 -0.111 0.480

0.007 -0.143 0.487

0.020 0.317 0.729

0.001 2.012** 0.054

0.059 2.278** 0.044

0.001 3.144** 0.004

16

0.001 3.144** 0.004

0.807 4.052 0.399

0.240 3.824** 0.013

0.176 5.206** 0.002

2.104

-1.768

-1.516

Summary of Findings

Yes. Prices in both market channels are integrated, implying that, there is one general market for all market participants

Obj. 1. Determine Obj. 1. Determine Obj. 1. Determine Obj. 1. Determine whether whether whether whether prices prices prices prices share a common longshare a common longshare a common longshare a common long

that, there is one general market for all market participants in the catfish supply chain

There is evidence of asymmetric adjustments, implying that, the catfish supply chain is dependent on interrelationships.

Obj. 2. Determine Obj. 2. Determine Obj. 2. Determine Obj. 2. Determine if the response of if the response of if the response of if the response of shocks shocks shocks shocks are symmetric or asymmetricare symmetric or asymmetricare symmetric or asymmetricare symmetric or asymmetric


Farm-raised catfish prices adjust from above (53%) and below (57%) the threshold to restore the longrelationship.

Obj. 3. Determine Obj. 3. Determine Obj. 3. Determine Obj. 3. Determine the time path the time path the time path the time path for for for for shocks to be transmitted from one market channel shocks to be transmitted from one market channel shocks to be transmitted from one market channel shocks to be transmitted from one market channel

to the otherto the otherto the otherto the other

Yes. Prices in both market channels are integrated, implying that, there is one general market for all market participants

share a common longshare a common longshare a common longshare a common long----run relationshiprun relationshiprun relationshiprun relationship

that, there is one general market for all market participants

There is evidence of asymmetric adjustments, implying that, the catfish supply chain is dependent on inter-market

are symmetric or asymmetricare symmetric or asymmetricare symmetric or asymmetricare symmetric or asymmetric

raised catfish prices adjust from above (53%) and below (57%) the threshold to restore the long-run

shocks to be transmitted from one market channel shocks to be transmitted from one market channel shocks to be transmitted from one market channel shocks to be transmitted from one market channel

�First, the evidence of non-linear price adjustment suggests the existence of some barriers to free trade

Policy Implications

existence of some barriers to free tradeand imperfect information.

� Results can be used by policy makers to develop distortions and promote free market practices.

� Such guidelines could focus on increasing the flow of information between the marketing channels since the speed at which information influence the adjustment speed


influence the adjustment speed

linear price adjustment suggests the trade—e.g., high transaction costs trade—e.g., high transaction costs

Results can be used by policy makers to develop guidelines to remove price free market practices.

guidelines could focus on increasing the flow of information between the marketing channels since the speed at which information travels will also influence the adjustment speed influence the adjustment speed

�Secondly, since the results show that achieved through farm-raised catfish prices,

Policy Implications

achieved through farm-raised catfish prices, channels for farmed catfish will likely benefit the artisanal fishers whose livelihoods depend on capture fishery.


that long-run market adjustments are catfish prices, setting up proper marketing catfish prices, setting up proper marketing

channels for farmed catfish will likely benefit the artisanal fishers whose fishery.

market interactions between farm-raised .. and wild...

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