Volatility spillovers and structural breaks: A case of onion in India

This paper examines the spillover effects and the endogenously determined structural breaks in major onion markets of India. A VAR model employed to identify linear dependencies among multiple time series processes, the diagonal VECH model is used to analyse the interdependence and spillover effects across onion markets. The Clemente-Montañés-Reyes unit root test is used to illustrate the presence of structural breaks in the price series. The resultsconcluded that the own-volatility spillover effects is highest in Lasalgaon market. Hyderabad market price volatility is more impacted by past shocks compared to other markets. The values of α and β are close to unity across all selected onion markets, indicating persistent volatility. Despite the presence of two structural breaks, Lasalgaon and Bengaluru markets reported significant values in the unit root test with structural breaks, indicating stationary time series data. There is no evidence of sudden disruptions in the long-term price trend during the Covid-19 pandemic period. Policies should prioritize improving market efficiency and reducing structural breaks in the selected onion markets based on local structural factors rather than external shocks.