Price signals across onion markets in Tamil Nadu

D Dinesh; R Parimalarangan; K M Shivakumar; A Malaisamy; V Saravanakumar; M Prahadeeswaran; D K Suresh; M Kalpana; S Senthilnathan; A Rohini

doi:10.14719/pst.5674

Authors

D Dinesh Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0009-0005-6920-4241
R Parimalarangan Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0000-0001-9648-3665
K M Shivakumar Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0000-0001-8561-5511
A Malaisamy Department of Agricultural Economics, AC & RI, Madurai-625104, India https://orcid.org/0000-0001-8822-6714
V Saravanakumar Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0000-0002-2971-3093
M Prahadeeswaran Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India
D K Suresh Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0000-0003-1616-3800
M Kalpana Department of Computer Sciences, TNAU, Coimbatore-641003, India
S Senthilnathan Department of Agricultural Economics, Tamil Nadu Agricultural University, Coimbatore-641003, India https://orcid.org/0000-0003-2924-3690
A Rohini Department of Agricultural and Rural Management, TNAU, Coimbatore-641003, India https://orcid.org/0000-0002-3476-0003

DOI:

https://doi.org/10.14719/pst.5674

Keywords:

ARCH-GARCH, causality test, market integration, Onion, price volatility, vector error correction model

Abstract

This research investigates price volatility and market integration within select small onion markets across Tamil Nadu, India. Using monthly wholesale price data from the Dindigul, Chennai, Coimbatore, and Idukki markets for the period 2014 to 2023, the study employs an array of econometric methods to analyze price dynamics and market interconnections. The ARCHGARCH model analysis revealed high price volatility persistence in selected small onion markets with the Coimbatore market displaying the highest levels of volatility. The Augmented Dickey-Fuller test established stationarity within the price series, while cointegration tests indicated a long-term equilibrium relationship across the markets analyzed in Tamil Nadu. Further examination through the Granger causality test revealed that price movements in the Coimbatore market had a causal impact on the Dindigul market. Additionally, the markets in Coimbatore, Dindigul, and Chennai were shown to exert influence over the Idukki market in Kerala. The Vector Error Correction Model (VECM) analysis demonstrated that in response to disequilibrium across the Coimbatore, Chennai, Dindigul, and Idukki markets, short -run price adjustments occurred at rates of 41%, 45%, 46%, and 48%, respectively, working towards restoring long-run equilibrium. In the Dindigul market, price adjustments with a one-month lag had a notable influence on current prices within Coimbatore, Chennai, and Dindigul. These findings underscore the interconnected nature of small onion markets within the region and shed light on price behavior patterns. Insights derived from this study could inform policy measures aimed at stabilizing prices and enhancing market efficiency in the small onion markets.

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