Extent of Market Integration of Wheat in Rajasthan

Abstract

To examine the co-integration between the prices of selected wheat foodgrain markets was analysed using the Johansen's co-integration test and Vector Error Correction Mechanism. Analysis of zero order correlation showed that there existed a strong integration among all the selected markets of wheat. The results of the Augmented Dickey-Fuller (ADF) unit root test for wheat showed that the existing data were non-stationary but their first differences were stationary. After taking the first difference, all the series became stationary which is obvious from the fact that calculated ADF values (8.302693 to-14.17203) for all the markets were less than the critical value (−4.036983) and were free from the consequence of unit root. Johansen's co-integration test for wheat indicated the presence of at least four co-integrating equation at 5 percent level of significance. Hence markets were having long run equilibrium relationship. Thus, the wheat markets in the state of Rajasthan are well integrated in terms of price.