Market Integration and Price Volatility in Tea Market of India

This paper examine the transmission and spatial integration analysis between tea producing (Guwahati, Kolkata and Chennai) and consuming (Mumbai, Delhi and Bhopal) markets using monthly price data from April 2005 to March 2020. Correlation analysis, Johansen cointegration test, Vector Error Correction Model and Granger causality were used for the analysis. Instability in the price series was measured by Cuddy Della-Valle index. The maximum instability in tea prices was in March in Guwahati market (18.48%)andthe seasonality index revealed that farmers got nearly average prices throughout the year. Johansen co-integration test revealed that all the selected markets were well integrated in the long run. Bhopal market was found to be the key market which influenced the price of all other markets by Granger Causality test. ARCH family model was found to be best fitted for estimating price volatility in the key market.