Long run and short run causality of rice consumption by urbanization and income growth in Ghana

The study focused on assessing the causality of urban population and income growth on rice consumption in Ghana from 1961–2011. Data for the study were sourced from world bank database and FAOSTATS. Johansen bivariate and multivariate co-integration approach, double log regression model, error correction model and the unrestricted vector autoregressive model were used for the analysis. The cointegration tests results indicated co-integration between variable pairs namely Rice consumption-Urban Population and Rice Consumption – Income and Urban Population at rank order 1. The speed of adjustment running from (urban population growth through income growth to rice consumption) and also from (urban population growth to rice consumption) towards long run equilibrium is 67% and 64% respectively. There is no co-integration between rice consumption and income growth; however there is a short run causality of rice consumption by income growth. Furthermore, the double log OLS regression showed that, a percentage change in urban population growth in Ghana will result in 1.6% change in rice consumption.