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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Devaluation and Cattle Market Integration in Burkina Faso
Authors:Araujo, ClaudioISNI
Bonjean, Catherine A.
Combes, Jean-Louis
Motel, Pascale C.
Periodical:Journal of African Economies
Geographic term:Burkina Faso
Agriculture, Natural Resources and the Environment
Economics and Trade
External link:https://jae.oxfordjournals.org/content/14/3/359.full.pdf
Abstract:The authors highlight an aspect of devaluation that is generally ignored in the literature, namely its positive impact on the integration of domestic markets of tradable goods. The analysis applies to cattle markets in Burkina Faso where cattle is both a tradable and a capital good that can be held intertemporally. The authors consider one category of animals, namely, 'fattened bulls', for which long price series are available. Cattle prices were collected on a monthly basis from January 1991 to December 1997. The authors develop an exogenous switching regime regression model consistent with spatial and intertemporal arbitrage conditions which categorize markets in two regimes: autarkic and integrated. When markets are autarkic, prices follow a random walk. Conversely, when two markets are integrated, their prices are closely correlated. The switching between the two regimes is driven by transaction costs which are supposed to be a function of the real effective exchange rate, among other variables. The authors show that the real exchange rate depreciation generated by the 1994 CFA franc devaluation favoured the integration of Burkina Faso's domestic cattle market by lowering the real transaction costs. App., bibliogr., notes, ref., sum. [Journal abstract]