Background: Agricultural price movements have been a matter of serious concern for policy makers in our country as the behaviour of agricultural prices is affecting adversely to the steady economic development. This paper test market co- integration of wheat in Sriganganagar District of Rajasthan.
Methods: This paper tests the extent of co-integration of wholesale prices of wheat among major markets of Sriganganagar district of Rajasthan by using Johansen test, examined the causality by granger causality tests and also captures the speed of adjustment to deviations in long run equilibrium in wheat markets by using Vector Error Correction Model(VECM). The data used in the co-integration analysis consists of monthly wholesale prices of nine gram dominated markets of Rajasthan for the period from 2005 to 2014.Monthly wholesale price data were for the study.
Findings: The results of the Augmented Dickey-Fuller (ADF) unit ischolar_main test for wheat showed that the existing data were non-stationary but their first differences were stationary. After taking first difference, all the series becomes stationary which is obvious from the fact that calculated values (-9.296309 to -14.18193) for all the markets were less than the critical value (- 4.038365)and were free from the consequence of unit ischolar_main. Johansen's co-integration test for wheat indicated the presence of at least eight co-integrating equation at 5 per cent level of significance. Hence markets were having long run equilibrium relationship. The pairwise granger's causality test for selected markets was significant at 1% level which was indicative of mutual influence exerted by the markets on each other.
Application/Improvements: Public policies in Sriganganagar district could play critical roles in facilitating market integration and thereby, market efficiency through the development of agricultural market information systems and road infrastructure.