ECONOMETRIC MODELING ON RURAL MARKETS: A CASE OF SILK COCOON MARKETS IN KARNATAKA

Abstract

The key features of agricultural market integration is that entities are able to offer price signals and other services in other jurisdictions on terms similar to those enjoyed by domestic market stakeholders.   The study empirically examines the dynamic interrelationships among the prices of major cocoons markets in Karnataka viz. Ramanagaram Siddlaghatta and Kolar in terms of market integration. The monthly average prices of crossbreed mulberry cocoons for a period from January 2004-December 2009 were used. The Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests were employed to find out the stationarity of price series. The results indicated that all the three price series of the markets were stationary after first difference. The test of cointegration among the markets was studied using Johansen's Multivariate cointegration procedure. The tests of Trace and Max Eigen values showed that the markets were cointegrated. The Vector Error Correction Model (VECM) revealed long-run price causality from Ramnagaram to other two markets. The price transmission was also observed across the cocoon markets. The cocoon prices of Ramnagaram market played a crucial role in determining the current prices both in long-run and short-run periods in Siddalaghatta and Kolar markets