# Palm Oil Case Study

OUTPUT=f(LPPO,LPSO,PHA,INTRA,EXR,IMPO,RANFAL,POLY, ECT, St).................(3.13)

Where;

OUTPUT = Nigerian palm oil Supply in year t, Proxied by palm oil Output (tons)

LPPO = Local Price of palm Oil in years t.

LPSO = Local Price of Soyabean in years t.

PHAt = palm oil harvested area at time t.

INTRA = Interest rate in years t.

EXR = Exchange Rate in years t.

RANFAL = Amount of Rainfall in year t (mm) as climate element

IMPO = Palm Oil Import in year t (tons) as a proxy for importation policy

Poly = Policy Variable (1-Policy intervention regime, 0-Non- policy intervention regime )

ECT is the error

*…show more content…*

Based on the above estimate, the residual term et= are generated; and iii). The residual term is included in the short-term equation correction as an error correction ………………………………………………………… (3.16) and obtained in this process are then interpreted and used as earlier illustrated with the simplified ECM representation in (3.15). The Engle and Granger (1987) approach to testing for co-integration is to test for stationarity of the stochastic residuals generated in the second stage of the three stage ECM procedure (Gujarati and Porter , 2009; Ogundele, 2007,Ayanwale et al 2011). Equation (3.16) will be estimated using the least square regression. This will lead us to a parsimonious error correction model which will equally be