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An Analytical Study of Market Integration Hypothesis for Natural Rubber Cultivation of Kerala

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  • Abey P Philip

Abstract

The purpose of this paper is to analyze the market integration and causal nexus between two market prices of rubber in Kerala Economy during the pre- and post-reform period. Augmented Dickey Fuller (ADF) test is used to ascertain whether the variables are exact order of integration. Cointegration technique is used to examine the validity of the market integration hypothesis with reference to prices of rubber in Kerala. After cointegration test, Error Correction Model (ECM) is used to identify the market prices of peripheral price on main market price and vice versa. The analysis shows a strong evidence of an existence of market integration in rubber price during the post-reform period. Moreover, the price changes of rubber were transmitted from the peripheral to the main market and vice versa during the reform period.

Suggested Citation

  • Abey P Philip, 2008. "An Analytical Study of Market Integration Hypothesis for Natural Rubber Cultivation of Kerala," The IUP Journal of Agricultural Economics, IUP Publications, vol. 0(2), pages 31-40, April.
  • Handle: RePEc:icf:icfjag:v:05:y:2008:i:2:p:31-40
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