Estimation of Price Transmission of Food Grains along the Food Grains Supply Chain: A Comparative Approach between Prior and Post Trade Liberalization Era in Tanzanian Context

Abstract

Aims: The empirical paper was undertaken to estimate price transmission of food grains along the food supply chain prior and post trade liberalization era. Study Design: The paper adopted an observational research design based on time series data set. Place and Duration of Study: The empirical paper was conducted in Tanzania Mainland by employing time series data set collected for thirty (30) years period (1981 – 2010). Methodology: The Error Correction Mechanism (ECM) model was employed to measure the price transmission of producers’ and consumers’ monthly prices of food grains along the food supply chain. The Ordinary Least Squares (OLS) was employed to estimates the ECM model. Unit root test was carried out by the Dickey-Fuller (DF) technique. The Augmented Engle-Granger (AEG) method was employed to test cointegration. The Serial Correlation Matrix (SCM) was employed to compare price transmission of producers’ and consumers’ monthly prices of food grains prior and post trade liberalization era (1981 - 1995 and 1996 - 2010) in Tanzanian context. Results: Empirical results revealed that price transmission of producers’ and consumers’ monthly prices of food grains were cointegrated from upstream to downstream during prior and post trade liberalization era. The serial correlation matrix results showed that producers’ and consumers’ monthly prices of food grains were positive correlated during prior and post trade liberalization era. Conclusion and Policy Implications: According to empirical findings, the study suggested that the price stabilization policies formulated and implemented by the Tanzanian government should focus much more on prices of food grains as the main food staples consumed by the majority of food consumers in rural and urban areas of the country.