Price integration for major tomato markets in India: An empirical approach

The study has investigated market integration across eight major wholesale tomato markets. Azadpur, Chomu, Ghaziabad, Gorakhpur, Kolar, Pimplagaon, Mulakalacheruvu and Vyra of the country by adopting Johansen's multivariate cointegration approach. The study has confirmed the presence of cointegration, implying the long-run price association among the markets. To get the additional evidence as to whether and in which direction price transmission is occurring between the market pairs, Granger causality test has been used, which has confirmed Gorakhpur to be the price-determining market. Ghaziabad and Gorakhpur had been found comparatively more efficient as they depicted most of the bidirectional causal relations with other markets. The pairs with Chomu market have not shown any causal relation between them. The impulse response functions were also conducted which have confirmed the results of co integration and Granger causality, but the speed of price transmission has been found relatively low in some market pairs that are spatially integrated which was examined through vector error correction method (VECM). It was concluded that the direction and intensity of price changes may be affected by the dynamic linkages between the demand and supply of tomato. In spite of decent information system and communication difference in prices was observed in different tomato markets of the country putting farmers at price risk.