Spatial integration and price volatility between the domestic and international markets of black pepper

This paper uses a vector error correction model (VECM) to assess the spatial integration and price volatility between the domestic and international markets of black pepper. It considers the data on the prices of Malabar Garbled 1 (MG 1) black pepper from January 2010 to April 2018. A higher absolute value of the error correction term indicates that the price had the tendency to find equilibrium at a faster rate in the long run. It was inferred from the generalized autoregressive conditional heteroscedastic (GARCH) analysis that black pepper prices exhibited persistent volatility, probably attributable to the seasonality in black pepper production and poor crop management at times of lower price. Based on the results, appropriate policies were suggested.