Co-integration Analysis of the Determinants of Cotton Lint Exports from Mali

Abstract

Following recent declines in volume and value of cotton lint exports from Mali, we made use of the Johansen Full Information Maximum Likelihood test to identify the magnitude and effects of key drivers of cotton lint exports from the country. In this regard, we estimated two primary models using volume of exports as dependent variable in one and value of exports as dependent variable in the other. Results for the two primary models estimated show that exports are generally stimulated by production, improvement in competitiveness, openness to trade, increasing international trade and previous growth in exports. Growth in the country’s exports of the commodity is however noted to be hindered by both domestic and international forces. In as much as distortionary induced downward pressure on world prices impacts negatively on exports from the country, inefficiencies and constraints in the domestic environment preclude the country from appropriately exploiting opportunities and adjusting to unexpected market developments in the short-run. To revitalize the gloomy export trade of Mali in cotton lint, policy makers and various stakeholders in the industry should put in place measures to address domestic inefficiencies (over which the country has some control compared to inefficiencies on the global market) to keep the country in a better position to exploit market opportunities and adjust to unexpected developments in the shortest possible time. In addition, measures should be put in place to revive the declining cotton production industry, promote trade openness, and improve on the quality of cotton lint exports. Increased production could be achieved through supporting of farmers in diverse ways, including provision of credits, input distribution, appropriate transmission of price increments to farmers, and creating of favorable marketing environment for their produce in terms of access and information. Minimization of trade restrictions and appropriate liberalization of internal and external marketing could further enhance the country’s terms of trade index of exports. To improve the quality of exports, emphasis should be placed on improving the ginning process to ensure attainment of high quality lint for export.