Market integration and price transmission in wheat markets of India: a transaction cost approach

IF 2.4 Q2 AGRICULTURAL ECONOMICS & POLICY
Mumtaz Ahmed, Naresh Singla, Kulwinder Singh
{"title":"Market integration and price transmission in wheat markets of India: a transaction cost approach","authors":"Mumtaz Ahmed, Naresh Singla, Kulwinder Singh","doi":"10.1108/jadee-06-2022-0123","DOIUrl":null,"url":null,"abstract":"PurposeWheat, which is one of the major staple food grain crops in India, continues to depict occasional fluctuation in the prices though Union government has adopted administered price policy for wheat by intervening in its procurement at assured prices and distribution. Such fluctuations in prices are usually attributed to inefficient functioning of the agricultural markets. Since spatially separated markets also play an important role to determine efficiency of the agricultural markets, the study has used market integration as one of the tools to analyze the price transmission across the spatially separated markets to identify causes of price fluctuations and suggest ways to stabilize wheat prices.Design/methodology/approachThe study utilizes monthly wholesale prices for January, 2006 to May, 2016 for dara wheat. First, the study employs augmented Dickey and Fuller (ADF), Phillips and Perron (PP) and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) tests to check stationarity in wheat prices. Second, Johansen's cointegration test is applied to assess the integration of wholesale prices between selected pairs of wheat markets to determine long-run relationship among them. Third, Granger casualty test is used to find the direction of causality between the wheat market pairs. Finally, threshold vector error correction model (TVECM) and likelihood ratio (LR) tests are employed to examine long-run adjustment of prices towards the equilibrium in selected wheat markets.FindingsSince wheat wholesale prices for the selected markets are found to be integrated of the order one, that is [I(1)], Johansen's test of cointegration is employed and its findings reveal that the selected wheat market pairs exhibit cointegration and show a long-run price association among themselves. There exists a bi-directional causality among the wheat market pairs. Since LR test is in favor of threshold model (except for Etawah–Delhi pair), one and two threshold models were also performed accordingly. Findings show that wholesale prices of wheat in Delhi markets remain higher than the prices of all other regional markets as regional markets are found to adjust their prices towards Delhi market. Distance of the wheat markets from each other is directly associated with threshold parameters, which are analogous to the transaction costs. Geographically dispersed wheat markets incorporate high transaction and vice versa.Research limitations/implicationsThe study argues that there is need to improve rural infrastructure and connectivity of the agricultural markets and remove market asymmetries through unified market regulating mechanisms across the states. This will enable price adjustment process from primary wholesale markets (in production regions) to the secondary wholesale markets (in scarcity regions) quickly.Originality/valueThe contribution of the study in the existing literature lies in the fact that there are no empirical evidences in the context of India that use price transmission as a tool of market integration among spatially separated wheat markets using TVCEM as this model examines role of transaction costs in efficient functioning of the agricultural markets.","PeriodicalId":45976,"journal":{"name":"Journal of Agribusiness in Developing and Emerging Economies","volume":null,"pages":null},"PeriodicalIF":2.4000,"publicationDate":"2022-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Agribusiness in Developing and Emerging Economies","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/jadee-06-2022-0123","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"AGRICULTURAL ECONOMICS & POLICY","Score":null,"Total":0}
引用次数: 1

Abstract

PurposeWheat, which is one of the major staple food grain crops in India, continues to depict occasional fluctuation in the prices though Union government has adopted administered price policy for wheat by intervening in its procurement at assured prices and distribution. Such fluctuations in prices are usually attributed to inefficient functioning of the agricultural markets. Since spatially separated markets also play an important role to determine efficiency of the agricultural markets, the study has used market integration as one of the tools to analyze the price transmission across the spatially separated markets to identify causes of price fluctuations and suggest ways to stabilize wheat prices.Design/methodology/approachThe study utilizes monthly wholesale prices for January, 2006 to May, 2016 for dara wheat. First, the study employs augmented Dickey and Fuller (ADF), Phillips and Perron (PP) and Kwiatkowski, Phillips, Schmidt and Shin (KPSS) tests to check stationarity in wheat prices. Second, Johansen's cointegration test is applied to assess the integration of wholesale prices between selected pairs of wheat markets to determine long-run relationship among them. Third, Granger casualty test is used to find the direction of causality between the wheat market pairs. Finally, threshold vector error correction model (TVECM) and likelihood ratio (LR) tests are employed to examine long-run adjustment of prices towards the equilibrium in selected wheat markets.FindingsSince wheat wholesale prices for the selected markets are found to be integrated of the order one, that is [I(1)], Johansen's test of cointegration is employed and its findings reveal that the selected wheat market pairs exhibit cointegration and show a long-run price association among themselves. There exists a bi-directional causality among the wheat market pairs. Since LR test is in favor of threshold model (except for Etawah–Delhi pair), one and two threshold models were also performed accordingly. Findings show that wholesale prices of wheat in Delhi markets remain higher than the prices of all other regional markets as regional markets are found to adjust their prices towards Delhi market. Distance of the wheat markets from each other is directly associated with threshold parameters, which are analogous to the transaction costs. Geographically dispersed wheat markets incorporate high transaction and vice versa.Research limitations/implicationsThe study argues that there is need to improve rural infrastructure and connectivity of the agricultural markets and remove market asymmetries through unified market regulating mechanisms across the states. This will enable price adjustment process from primary wholesale markets (in production regions) to the secondary wholesale markets (in scarcity regions) quickly.Originality/valueThe contribution of the study in the existing literature lies in the fact that there are no empirical evidences in the context of India that use price transmission as a tool of market integration among spatially separated wheat markets using TVCEM as this model examines role of transaction costs in efficient functioning of the agricultural markets.
印度小麦市场的市场整合与价格传导:交易成本方法
小麦是印度的主要粮食作物之一,尽管联邦政府对小麦采取了管理价格政策,以保证价格和分销进行干预,但小麦的价格仍然偶尔波动。这种价格波动通常归因于农业市场的低效运作。由于空间分离的市场在确定农产品市场效率方面也发挥着重要作用,因此本研究将市场整合作为分析空间分离市场之间价格传导的工具之一,以确定价格波动的原因,并提出稳定小麦价格的方法。设计/方法/方法本研究采用数据小麦2006年1月至2016年5月的月度批发价格。首先,本研究采用增强的Dickey and Fuller (ADF)、Phillips and Perron (PP)和Kwiatkowski、Phillips、Schmidt and Shin (KPSS)检验小麦价格的平稳性。其次,采用约翰森协整检验评估小麦批发价格对之间的整合,以确定它们之间的长期关系。第三,运用格兰杰伤亡检验找出小麦市场对之间的因果关系方向。最后,采用阈值向量误差修正模型(TVECM)和似然比(LR)检验了所选小麦市场价格向均衡方向的长期调整。由于所选市场的小麦批发价格被发现是一阶整合的,即[I(1)],因此采用Johansen协整检验,其结果表明所选小麦市场对表现出协整,并表现出它们之间的长期价格关联。小麦市场对之间存在双向因果关系。由于LR检验倾向于阈值模型(Etawah-Delhi对除外),因此也相应地进行了一个和两个阈值模型。调查结果表明,德里市场的小麦批发价格仍然高于所有其他区域市场的价格,因为区域市场的价格被发现向德里市场调整。小麦市场之间的距离与阈值参数直接相关,这类似于交易成本。地理上分散的小麦市场具有高交易量,反之亦然。研究的局限性/启示研究认为,需要通过各州统一的市场调节机制来改善农村基础设施和农业市场的连通性,消除市场不对称。这将使从初级批发市场(生产区)到二级批发市场(稀缺区)的价格调整过程迅速进行。现有文献中研究的贡献在于,在印度的背景下,没有经验证据表明使用价格传导作为空间分离的小麦市场之间市场整合的工具,使用TVCEM作为该模型检验交易成本在农业市场有效运作中的作用。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
CiteScore
4.60
自引率
37.50%
发文量
58
期刊介绍: The Journal of Agribusiness in Developing and Emerging Economies publishes double-blind peer-reviewed research on issues relevant to agriculture and food value chain in emerging economies in Asia, Africa, Latin America and Eastern Europe. The journal welcomes original research, particularly empirical/applied, quantitative and qualitative work on topics pertaining to policies, processes, and practices in the agribusiness arena in emerging economies to inform researchers, practitioners and policy makers
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术官方微信