Price Dynamics and Integration of Onion Markets in India

Abstract

The current study uses the Correlation matrix, Vector Auto Regressive model, Granger causality test and Instability index to investigate the level of market integration, price transmission and price instability in the key onion markets in India, namely, Azadpur, Bangalore, Belgaum, Hassan, Haveri, Hubli, Mysore, and Nashik. The findings provided substantial evidence for the co-integration and interdependence of these markets. Bangalore market has a positive relationship with the Nashik and Azadpur markets, with coefficients of 1.15 and 0.54, respectively. Bangalore and Belgaum displayed a solid, significant positive correlation with a coefficient of 0.770. Conversely, some markets show relatively weaker correlations, such as Azadpur and Hassan, with a coefficient of 0.389. Instability across major onion markets revealed that all the markets are volatile, as the instability index was more than 30 per cent. Since there is unidirectional causality from Hubli-Bangalore and Azadpur-Bangalore market pairs, it makes it necessary for future research to examine the influence of internal and external factors like market infrastructure, improving information technology to allow regular flow of market information to assist farmers in increasing their income. Keywords: Granger causality, instability, price transmission, price volatility. JEL Codes: B23, C01, C22, E31.