Co-integration and error correction modelling for prices of black pepper in Karnataka

Abstract

An attempt was made to know the market integration on prices of major black pepper markets in Karnataka, monthly prices of black pepper from July 2015 to October 2018 of five different markets of Karnataka were used for the analysis. Unit root test, ADF test and Phillip Peron test results indicates the non Stationarity of the level series and after differencing data series becomes stationary and Johansen co-integration test was conducted as results revealed that changes in market prices of black pepper in these markets significantly affect each other in the short-run as well as in the long-run, all the markets will have equilibrium adjustment, indicating that there would be a co-integrating relationship among the different black pepper markets in Karnataka. The high degree of co-integration amongst various markets indicates that these markets are competitive and efficient at the wholesale levels.