The Impacts of Agricultural Price Policy on Cocoa Supply in Ghana: An Error Correction Estimation

Awudu Abdulai and Peter Rieder

Journal of African Economies, 1995, vol. 4, issue 3, 315-35

Abstract: This paper presents an empirical investigation of the supply of cocoa in Ghana. The error correction model which avoids the familiar partial adjustment model's unrealistic assumption of a fixed target supply based on stationary expectation is used in the analysis. The model provides good empirical results, and is preferred in specification tests to the partial adjustment model. The results reveal that cocoa supply is significantly influenced by the real producer price of cocoa, real price of maize, the supply of manufactured goods and the real exchange rate. The supply of cocoa was found to be inelastic both in the short and long runs. However, the elasticities obtained in the study suggest that supply of cocoa is more responsive in a shorter time than thought previously. Copyright 1995 by Oxford University Press.

Date: 1995
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