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Abstract
Prices guide economic agents’ resource allocation and output mix decisions. The extent of price
transmission determines the nature of market integration. Volatility spill-over in spatially linked
agricultural markets has been investigated, but not across borders. We developed an E-GARCH
model which enabled us to explore various properties of price volatility – volatility persistence,
asymmetric interference and volatility spill-over. We found the existence of significant volatility
spill-over within the South African Customs Union (SACU) using sheep price data in Namibia
and South Africa, especially with the introduction of Small Livestock Marketing Scheme (SLMS)
in namibia. The results show more stickiness in the retail market than the wholesale market in
South Africa (90% and 49%), suggesting a greater impact of price volatility on South Africa
consumers than the processors. In terms of volatility spill-over, the asymmetric effect is
significant at 5 percent suggesting that these two markets are somewhat integrated, since the
incidence of volatility spill-over from Namibia has influenced price information transmission in
the South African sheep market. Furthermore, 79 percent of the volatility in the Namibian market
is transmitted through sheep meat retail prices to the South African sheep market. The measure
of volatility persistence is significant; indicating that 45 percent of the volatility transmitted to
the South African sheep market is persistent.