Asymmetric price transmission and market integration in Malawi’s selected rice markets

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The study examined the presence of asymmetric price transmission among selected rice markets in Malawi. Using the World Bank’s monthly price data compiled from various markets from 2007 to 2024, the study applied the Nonlinear Autoregressive Distributed Lag Model (NARDL) to capture both short-term and long-term asymmetric price transmission among rice markets. The results show that Malawi's rice prices maintain steady long-term relationships, with prices reverting to equilibrium after a shock. Evidence of asymmetry is present in certain market pairs, such as Mzuzu-Nkhotakota and Blantyre, as well as other markets. Rice price transmission to Blantyre and other markets exhibits both long-term and short-term asymmetry. In the long run, price increases from supply hubs like Mzuzu are transmitted more strongly than decreases, showing traders’ tendency to secure profits during price rises. In the short run, Blantyre reacts more quickly to positive price shocks from Karonga and Dwangwa, highlighting the influence of expectations and opportunistic trading on price movements. While this study cannot conclusively identify the underlying causes of asymmetric price transmission due to its reliance on price data, future research should consider incorporating data on trade flows, transaction costs, and trader behaviour to clarify the mechanisms behind these asymmetries. In the meantime, policy responses that diversify supply sources from upland rice cultivation and strengthen market linkages are essential to enhance market efficiency and integration. To further enhance price stability and efficiency in Malawi's rice markets, effective market integration and policy interventions should depend on an understanding of both short- and long-run price dynamics.