Abstract
Background/ Objectives: This study investigated market integration and asymmetric price transmission in the potato markets for the seven major Potato markets, i.e., Okara, Faisalabad, Sargodha, Lahore, Gujranwala, Multan, and Rawalpindi in the province of Punjab, Pakistan. Methods/Statistical analysis: The study estimated the data by using the Johansen Co-integration (JJ) technique, vector error correction model, and Vector autoregressive (VAR) model. Findings: The empirical results show as major Potato markets are integrated, i.e., there exist the law of one price. These findings also supported the results of the Granger causality analysis. The results of pairwise granger casualty show the direction of price transmission between the selected Potato markets in Punjab, Pakistan. Application: These results suggest for market integration and competition rather than collusion in Potato markets in Punjab, Pakistan, and provide little justification for government intervention designed to improve competitiveness or to enhance market efficiency. Keywords: Market integration; Potato; Co-integration; Causality
Highlights
The concept of spatial market integration retained with the contribution of Jasdanwalla [1], Lele [2], and Jones [3]
Spatial market integration assists the government in agriculture price policy questions regarding government intervention in markets in the developing countries [6]
The paper investigated the hypothesis of market integration in the selected major potato markets in Punjab using the correlation matrix method and Johnson co-integration analysis
Summary
The concept of spatial market integration retained with the contribution of Jasdanwalla [1] , Lele [2] , and Jones [3]. Jasdanwalla [1] and Lele [2] estimated the spatial market integration through the correlation of coefficient, markets are said to be integrated if there exists a high correlation between prices of different markets. Later Dawson and Dey [9] , Ghosh [4] , Zahid, et al [10] , and Choi, et al [11] criticized the correlation approach due to its static nature They used the concept of co-integration technique to investigate the phenomena of market integration in the long run. The following study empirically estimated the potato market integration through the co-integration and verified the existence of the law of one price in the selected markets
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