Price Transmission along the Cotton Value Chain^§

The study has examined integration and price transmission in the cotton-based textile value chain, using Johansen multivariate co-integration and error correction model. Although price adjustment mechanism is slow, the findings have provided a clear indication of the price transmission along the chain, and also the existence of a long-run equilibrium. The raw cotton price has been found exogenous, but has significant influence on the prices of cotton yarn and cloth. The textile value chain has been found effectively integrated; hence the policies should take into account the effect of impact on the entire value chain as to enable the cotton producers capture benefits of value addition.