Co-integration of major soybean markets in India

S. S. Burark, Latika Sharma, J.M. Dhaka and G. L. Meena

Indian Journal of Agricultural Marketing, 2015, vol. 29, issue 2

Abstract: This study tests the extent of co-integration of wholesale prices of soybean among major markets of country using Johansen test to examine the causality by granger causality tests and also captures the speed of adjustment to deviations in long run equilibrium in soybean markets by using Vector Error Correction Model(VECM). The data used in the co-integration analysis consists of monthly wholesale prices of four soybean dominated markets i.e Kota and Baran from Rajasthan and Ratlam and Ujjain from Madhya Pradesh for the period from 2003 to 2014. It was observed that all selected markets viz Baran, Kota, Ratlam and Ujjain were co-integrated. The pairwise granger's causality test for selected markets was significant at 1% level of signifi cance which indicated mutual influence exerted by the markets on each other. The error correction model suggests that markets came to short run equilibrium as indicated that, Ujjain and Ratlam market 59 to 69 per cent of the disequilibrium got corrected in short run and influenced its own prices at two and three week lag and also the adjustment to deviations from equilibrium in the markets lead to a long-term equilibrium in most of the markets. All selected markets were cointegrated and the extent of it very high. Our results implies that public policies in selected market could play critical role in facilitating market integration and thereby, market effi ciency through the development of agricultural market information systems and road infrastructure.

Keywords: Crop; Production/Industries (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ags:injagm:399544

DOI: 10.22004/ag.econ.399544

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