Price transmission in major onion markets of Uttar Pradesh

The study has analysed price trend, market integration, and price movements of onion in four major markets viz., Agra, Gorakhpur, Lucknow, and Varanasi of Uttar Pradesh for the period 2011–2015 (July to June). The production data has shown that onion output in Uttar Pradesh has seen ups and downs in alternate years during 1984–85 to 2004–05, and spectacular increase has been noticed in area, production, and yield thereafter. Integration across selected onion markets was analysed adopting Johansen's multivariate approach. The study has confirmed presence of cointegration, implying the long-run price association among the markets. The Granger causality test has confirmed price transmission is occurring across markets, implying that bidirectional causality exists between markets. The impulse response functions were also conducted which have confirmed the results of cointegration and Granger causality and showed that price shock given in one market and its response in other markets disappear in less time (15–20 days). The findings may be useful in designing of a network of wholesale markets in Uttar Pradesh to enhance market integration and better price transmission.