Abstract
The market for fresh produce such as fruits in Malaysia is alleged to be inefficient due to poor flow of information between market levels and uncompetitive market particularly at the wholesale and retail levels. Due to these structural problems, pricing efficiency is questionable, in that they are not integrated. This study intends to examine the cointegration and causality relationships between the farm and retail prices in the Malaysian market of fruits. To that end, the bivariate cointegration approach, using Granger causality tests, is applied. The study uses monthly data from January 2000 through December 2010. The results show that there is evidence of long run bidirectional causal relationship between farm and retail prices for banana and watermelon. However, the analysis revealed a long run unidirectional relationship from farm prices to retail prices with no evidence of reverse or feedback causality running from farm price to retail prices for jackfruit and durian.
Highlights
The process of price movements transmission taking place all through upstream phases to the ultimate consumer, in the food sector, has been one of the most investigated areas in the agricultural economics literature for policy objectives (Palaskas, 1995)
The study adopts a simple model to express the relationship between farm and retail prices for selected fruits and test the hypothesis of whether changes in farm prices play an important role in changing retail prices for fruits in Malaysia Equation (1): lnRPit = α′0 + α1′lnFPit + v′t
This study investigates the market linkages for retail prices and the farm-gate price for selected fruits in Malaysia in the period January 2000 through December 2010
Summary
The process of price movements transmission taking place all through upstream phases to the ultimate consumer, in the food sector, has been one of the most investigated areas in the agricultural economics literature for policy objectives (Palaskas, 1995). Agricultural economists have focused on the farmto-retail price transmission process because the relationship between farm and retail prices provides insights into marketing efficiency and consumer and farmer welfare. Food retail prices and farm prices may drift apart in the short run due to policy changes or seasonal factors, but if they continue to be too far apart, economic forces, such as market mechanisms may bring them together, in the long run (Palaskas, 1995; Enders and Siklos, 1998). More integration will be accompanied with a greater interdependence among prices in the short run, such that every price contributes to explain the evolution of the others
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
