PRICE DYNAMICS OF DOMESTIC AND INTERNATIONAL GROUNDNUT MARKETS: A VECTOR ERROR CORRECTION MECHANISM (VECM) APPROACH

A.A. KEERTHIGA¹, S.M. GOPAL²*, P.A. PRIYANKA^3
1Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore, 641003, Tamil Nadu, India
²Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore, 641003, Tamil Nadu, India
³Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore, 641003, Tamil Nadu, India
* Corresponding Author : smuralgo@gmail.com

Received : 05-05-2019     Accepted : 26-05-2019     Published : 30-05-2019
Volume : 11     Issue : 10       Pages : 8441 - 8445
Int J Agr Sci 11.10 (2019):8441-8445

Keywords : Stationarity, Market Integration, Co-Integration, Short-Run Disequilibrium
Conflict of Interest : None declared
Acknowledgements/Funding : Authors are thankful to Tamil Nadu Agricultural University, Coimbatore, 641003, Tamil Nadu.
Author Contribution : All authors equally contributed

Market integration in agricultural commodities is important for both developed and developing countries. If prices are not perfectly transmitted, then it may lead to mismatch and distortions in production and distribution. A sample of six domestic groundnut markets from the traditional groundnut growing states of Karnataka, Rajasthan, Andhra Pradesh, Maharashtra, Gujarat and Tamil Nadu were selected along with one major international groundnut market, namely Rotterdam market, Netherland. Analysis was carried out using the monthly price data between January 2000 and December 2018. Findings revealed that the prices became stationary only upon first differencing. The estimated error coefficients revealed that in Bijapur and Rotterdam markets disequilibrium got corrected within a month by changes in its own prices with speed of convergence at 20 and 76 per cent in the long-run path. But for other markets the speed of convergence ranged from 9 per cent to 69 per cent for short-run price movements to become stable along long-run equilibrium path in one or two-month lagged period.

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