Market integration and price volatility in domestic mustard markets

This paper tests the extent of co-integration of wholesale prices of Mustard among major markets of Haryana and Rajasthan by using Johansen, Granger Causality Tests and also captures the speed of adjustment to deviations in long run equilibrium in mustard markets by using Vector Error Correction Model. The monthly wholesale price data were used for the study. Out of four markets only two markets were cointegrated. The pair-wise Grangers Causality Test for Hisar and Sirsa markets was significant statistically which was indicative of mutual influence exerted by the markets on each other. On the other hand Sri-Ganganagar market exhibited unidirectional influence on Rewari market. The results of the price volatility test pointed out that Sirsa market was the leader. The existence of price volatility in mustard prices in Sirsa market was relatively more volatile than Hisar and Rewari markets which were confirmed through GARCH Estimation.