An econometric analysis of market integration in Telangana maize markets

This study tests long-run spatial market integration between price pairs of maize in five major markets viz., Badepally, Karimnagar, Siddipet, Nagarkurnool and Warangal of the Telangana State by adopting important econometric tools like Johansen’s multivariate co integration approach, Augmented Dickey-Fuller (ADF), Granger causality test and Vector Error Correction Model (VECM). The study has confirmed the presence of co integration, implying the five years 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 Badepally to be the price-determining market. Badepally has been found comparatively more efficient as it has depicted most bidirectional causal relations with other markets. The Vector Error-Correction Model (VECM) shown the selected markets of maize are employed to know the speed of adjustments for the prices of maize among selected markets, for short run and long run equilibrium of prices. The results show that Badepally market influence prices in the other three major markets i.e., Warangal, Siddipet and Karimnagar.