Year: 2022 | Month: March | Volume 9 | Issue 1

Price Behaviour, Market Integration and Price Volatility in Tomato Market in North India

Amit Guleria Pardeep Singh Laishram Priscilla
DOI:10.30954/2394-8159.01.2022.4

Abstract:

This paper analysed the transmission and spatial integration between tomato producing (Solan and Ludhiana) and consuming (Chandigarh and Delhi) markets using monthly price data from April 2005 to March 2019. Correlation analysis, Johansen co-integration test, Vector Error Correction Model and Granger causality were used for the analysis. Instability in the price series was measured by Cudda Della-Valle index. The maximum instability in tomato prices was in November month (50 to 59 per cent) and seasonality index showed that farmer received more than average price between August to November. Johansen co-integration test revealed that all the selected markets were well integrated in the long run. The speed of adjustment was highest in Delhi market (30 per cent) followed by Chandigarh (9 per cent) and Solan (6 per cent). In the short run, however, all markets were integrated, i.e., they were influenced by their own lagged prices as well as current and lagged prices of other markets. Delhi market was found to be the key market which influenced the price of all other markets by Granger Causality test. Further, ARCH model was found to be best fitted for estimating price volatility in the key market. The low root mean square error (RMSE) and the mean absolute percentage error (MAPE) reinforce high forecasting ability of the fitted model.

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