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A Potato Market Integration Analysis for India

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  • Olli Salmensuu

Abstract

We constructed co-integration relation and Engle–Granger type error-correction models for the wholesale potato markets of three Indian regions. In addition to the standard result of the existence of error-correction mechanisms in Indian potato markets, the chosen setting allows for inspection of how these market areas differ in their return to the co-integrating relation. The northern area differed from the other market relations studied with its slower return to equilibrium, 8.0–8.6 weeks compared to 5.0–6.3 weeks. The result may indicate that the Delhi and Agra markets are central playing grounds for speculators, speculators manipulating potato prices farther and longer time away from the natural price relation. Short-run or same-week elasticities between the markets studied ranged from 0.12 to 0.34. Long-run elasticities ranged from 0.55 to 1.11. Short-run effect has to be multiplied by approximately four to obtain the long-run effect. JEL: Q13, Q18, R12, R32

Suggested Citation

  • Olli Salmensuu, 2017. "A Potato Market Integration Analysis for India," Review of Market Integration, India Development Foundation, vol. 9(3), pages 111-138, December.
    • Handle: RePEc:sae:revmar:v:9:y:2017:i:3:p:111-138
    DOI: 10.1177/0974929217744657
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    References listed on IDEAS

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    1. Basu, Jyotish Prakash, 2006. "Cointegration and Market Integration: An Application to the Potato Markets in Rural West Bengal, India," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25705, International Association of Agricultural Economists.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. O Grada, Cormac, 2001. "Markets and Famines: Evidence from Nineteenth-Century Finland," Economic Development and Cultural Change, University of Chicago Press, vol. 49(3), pages 575-590, April.
    4. Basu, Jyotish Prakash & Dinda, Soumyananda, 2003. "Market Integration: An Application of Error Correction Model to Potato Market in Hooghly District, West Bengal," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 58(4), December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Market integration; co-integration; error-correction; speculation; developing countries;
    All these keywords.

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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