IDEAS home Printed from https://ideas.repec.org/a/agr/journl/vxxiiiy2016i3(608)p283-306.html
   My bibliography  Save this article

Commodity market integration and price transmission: Empirical evidence from India

Author

Listed:
  • Pratap Kumar JENA

    (North Orissa University, Baripada, India)

Abstract

In the era of globalization markets are connected to each other not only to compete domestic products with international products to increase economic stand but also export the required products. Therefore, in the recent years markets are more vibrant and transparent in integration with each other. Over the last couple of years, it has been seen that commodity prices have increased and remained highly volatile not only in international market but in India. Therefore, this paper examines the market integration and price transmission in India using the time series techniques of cointegration and vector error correction models. The study finds that there is both short-run and long-run relationship between domestic commodity index (all commodity index, energy index and metal index) prices and international commodity index (all commodity index, energy index and metal index) prices. But, there is no relationship between domestic agriculture index price and international agriculture index price. The study also finds that except the agriculture index price, the change in domestic commodity index (all commodity index, energy index and metal index) prices are due to the change in international commodity index (all commodity index, energy index and metal index) prices.

Suggested Citation

  • Pratap Kumar JENA, 2016. "Commodity market integration and price transmission: Empirical evidence from India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(608), A), pages 283-306, Autumn.
    • Handle: RePEc:agr:journl:v:xxiii:y:2016:i:3(608):p:283-306
    as

    Download full text from publisher

    File URL: http://store.ectap.ro/articole/1214.pdf
    Download Restriction: no
    File URL: http://www.ectap.ro/articol.php?id=1214&rid=124
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. McNew, Kevin, 1996. "Spatial Market Integration: Definition, Theory, and Evidence," Agricultural and Resource Economics Review, Cambridge University Press, vol. 25(1), pages 1-11, April.
    2. Goetz, Linde & von Cramon-Taubadel, Stephan & Kachel, Yael, 2008. "Measuring Price Transmission in the International Fresh Fruit and Vegetable Supply Chain: The Case of Israeli Grapefruit Exports to the EU," Discussion Papers 42833, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    3. Harriss, Barbara, 1979. "There is Method in My Madness: Or is it Vice Versa? Measuring Agricultural Market Performance," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 17(2), pages 1-22.
    4. Martin Ravallion, 1986. "Testing Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 102-109.
    5. Brooks,Chris, 2008. "RATS Handbook to Accompany Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9780521896955.
    6. John Baffes, 1991. "Some Further Evidence on the Law of One Price: The Law of One Price Still Holds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1264-1273.
    7. Jochen Meyer & Stephan von Cramon‐Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611, November.
    8. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    9. Ajit R. Joshi & Debashis Acharya, 2011. "Commodity Prices and Domestic Inflation in India," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 3(2), pages 223-246, May.
    10. McNew, Kevin & Fackler, Paul L., 1997. "Testing Market Equilibrium: Is Cointegration Informative?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(2), pages 1-17, December.
    11. Richard J. Sexton & Catherine L. Kling & Hoy F. Carman, 1991. "Market Integration, Efficiency of Arbitrage, and Imperfect Competition: Methodology and Application to U.S. Celery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 568-580.
    12. Froot, Kenneth A & Klemperer, Paul D, 1989. "Exchange Rate Pass-Through When Market Share Matters," American Economic Review, American Economic Association, vol. 79(4), pages 637-654, September.
    13. Sanogo, Issa, 2008. "SPATIAL integration of the rice market: emprirical evidence from mid-west and far-west Nepal and the Nepalese-Indian border," MPRA Paper 14488, University Library of Munich, Germany.
    14. Muhammad Sarwar Zahid & Abdul Qayyum & Wasim Shahid Malik, 2007. "Dynamics of Wheat Market Integration in Northern Punjab, Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 817-830.
    15. Madhusudan Ghosh, 2003. "Spatial Integration of Wheat Markets in India: Evidence from Cointegration Tests," Oxford Development Studies, Taylor & Francis Journals, vol. 31(2), pages 159-171.
    16. Michael M. Knetter & Matthew J. Slaughter, 1999. "Measuring Product-Market Integration," NBER Working Papers 6969, National Bureau of Economic Research, Inc.
    17. Weber, K. & Lee, David R., 2006. "Spatial Price Integration in U.S. and Mexican Rice Markets," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25542, International Association of Agricultural Economists.
    18. Christopher B. Barrett & Jau Rong Li, 2002. "Distinguishing between Equilibrium and Integration in Spatial Price Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 292-307.
    19. McNew, Kevin, 1996. "Spatial Market Integration: Definition, Theory, And Evidence," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 25(1), pages 1-11, April.
    20. Wlazlowski, Szymon, 2001. "Petrol and Crude Oil Prices: Asymmetric Price Transmission," MPRA Paper 1486, University Library of Munich, Germany, revised 2001.
    21. P. J. Dawson & P. K. Dey, 2002. "Testing for the law of one price: rice market integration in Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(4), pages 473-484.
    22. Raghbendra Jha & K. V. Bhanu Murthy & Anurag Sharma, 2008. "Market Integration in Wholesale Rice Markets in India," Palgrave Macmillan Books, in: Raghbendra Jha (ed.), The Indian Economy Sixty Years After Independence, chapter 13, pages 233-246, Palgrave Macmillan.
    23. Eric Monke & Todd Petzel, 1984. "Market Integration: An Application to International Trade in Cotton," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(4), pages 481-487.
    24. Badiane, Ousmane & Shively, Gerald E., 1998. "Spatial integration, transport costs, and the response of local prices to policy changes in Ghana," Journal of Development Economics, Elsevier, vol. 56(2), pages 411-431, August.
    25. Bakucs, Lajos Zoltan & Falkowski, Jan & Ferto, Imre, 2012. "What causes asymmetric price transmission in agro-food sector? Meta-analysis perspective," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134765, Agricultural Economics Society.
    26. Ben Kaabia, Monia & Gil, Jose Maria & Boshnjaku, L., 2002. "Price Transmission Asymmetries in the Spanish Lamb Sector," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24908, European Association of Agricultural Economists.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Markus Arlindo Monteiro & Brent Damian Jammer, 2024. "Price Dynamics in South African Agriculture: A Study of Cross-Commodity Spillovers between Grain and Livestock Markets," Sustainability, MDPI, vol. 16(8), pages 1-24, April.
    2. Chimaliro, Aubrey Victor, 2018. "Analysis of main determinants of soya bean price volatility in Malawi," Research Theses 334743, Collaborative Masters Program in Agricultural and Applied Economics.
    3. T.G. Saji, 2018. "Price transmission for natural rubber: India integration with world markets," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(617), W), pages 155-168, Winter.
    4. Monika Roman & Michał Roman, 2020. "Milk Market Integration between Poland and the EU Countries," Agriculture, MDPI, vol. 10(11), pages 1-17, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pratap Kumar JENA, 2016. "Commodity market integration and price transmission: Empirical evidence from India," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 283-306, Autumn.
    2. Rahman, Mohammad Chhiddikur, 2020. "Welfare Impact of Asymmetric Price Transmission on Bangladesh Rice Consumers," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 242248, September.
    3. Ankamah-Yeboah, Isaac, 2012. "Spatial Price Transmission in the Regional Maize Markets in Ghana," MPRA Paper 49720, University Library of Munich, Germany.
    4. Stephan von Cramon-Taubadel, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Taylor & Francis Journals, vol. 56(2), pages 83-96, April.
    5. Sahito, Jam Ghulam Murtaza, 2015. "Market integration of wheat in Pakistan," Discussion Papers 72, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    6. Von Cramon-Taubadel, Stephan, 2017. "The analysis of market integration and price transmission – results and implications in an African context," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 56(2), March.
    7. Mu, Yali, 2024. "Measuring and benchmarking time-varying market efficiency," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344294, International Association of Agricultural Economists (IAAE).
    8. Akpan, S.B. & Udoka, S. J. & Inimfon, V. P., 2016. "Assessment of Rice Market Competiveness Using Horizontal Price Transmission: Empirical Evidence from Southern Region of Nigeria," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 8(2), pages 1-16, June.
    9. Amikuzuno, Joseph & Ogundari, Kolawole, 2013. "Price transmission Analysis and Associated Policy in Sub-Saharan Africa’s Agricultural Markets: What Does the Literature Say?," 2013 Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 160479, African Association of Agricultural Economists (AAAE).
    10. Raper, Kellie Curry & Thornsbury, Suzanne & Aguilar, Cristobal, 2009. "Regional Wholesale Price Relationships in the Presence of Counter-Seasonal Imports," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(1), pages 271-290, April.
    11. Sekhar, C.S.C., 2012. "Agricultural market integration in India: An analysis of select commodities," Food Policy, Elsevier, vol. 37(3), pages 309-322.
    12. Van Campenhout, Bjorn, 2007. "Modelling trends in food market integration: Method and an application to Tanzanian maize markets," Food Policy, Elsevier, vol. 32(1), pages 112-127, February.
    13. Shrestha, Sundar S. & Frechette, Darren L., 2003. "Transfer Costs And Spatial Price Efficiency In The Nepalese Tomato Markets," 2003 Annual meeting, July 27-30, Montreal, Canada 22076, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    14. Muhammad Sarwar Zahid & Abdul Qayyum & Wasim Shahid Malik, 2007. "Dynamics of Wheat Market Integration in Northern Punjab, Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 817-830.
    15. Negassa, Asfaw & Myers, Robert & Gabre-Madhin, Eleni Z., 2004. "Grain marketing policy changes and spatial efficiency of maize and wheat markets in Ethiopia," MTID discussion papers 66, International Food Policy Research Institute (IFPRI).
    16. Giulia LISTORTI, 2008. "Price Transmission Mechanisms: a Policy Investigation of International Wheat Markets," Working Papers 318, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    17. Gerald Shively & Ganesh Thapa, 2017. "Markets, Transportation Infrastructure, and Food Prices in Nepal," American Journal of Agricultural Economics, John Wiley & Sons, vol. 99(3), pages 660-682, April.
    18. Hamulczuk, Mariusz, 2020. "Spatial Integration of Agricultural Commodity Markets – Methodological Problems," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 311225, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    19. Padilla-Bernal, Luz E. & Thilmany, Dawn D., 2003. "Price Relationships Among North American Fresh Tomato Markets: A Comparison Between Mexican And U.S. Markets," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 5(3), pages 1-19.
    20. Jaramillo-Villanueva, J.L. & Sarker, R. & Cabas-Monje, J. & Portilla-Duran, L., 2018. "Vertical and Spatial Price Transmissi n in the Mexican and International Milk Market," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277283, International Association of Agricultural Economists.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:agr:journl:v:xxiii:y:2016:i:3(608):p:283-306. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mircea Dinu (email available below). General contact details of provider: https://edirc.repec.org/data/agerrea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.