Spatial and vertical price transmission in potato markets in India
Madhusudan GhoshPurpose
This paper has examined the dynamics of price transmission and co-movement across geographically dispersed markets and in the wholesale–retail supply chains for a perishable crop (potato) in eight major Indian cities, evaluating the interconnection among the wholesale and retail prices and market arrivals of the crop.
Design/methodology/approach
It has applied various unit-root tests, a standard vector autoregressive model, the Granger causality test and a correlation method to monthly potato prices and market arrivals data from January 2010 to December 2022.
Findings
It has offered evidence for spatial and vertical integration of potato markets. The wholesale prices were transmitted across the cities involved in potato trading. The prices were transmitted between wholesale and retail markets in most cases. While market arrivals have influenced the prices and marketing margins, these factors in turn have some effects on market arrivals in some cities. There exists evidence of significant co-movement of prices in the spatial and vertical markets.
Research limitations/implications
In the markets with significant cross-market price transmission, the effects and incentives of any policy are likely to be transmitted to all the markets without requiring much intervention. The policies to reduce price variability and enhance market integration should focus on facilitating trade, improving infrastructure and reducing restrictions on the movement of the commodity across markets.
Originality/value
It has applied an alternative methodology to long-range monthly data for a set of objectively selected potato markets representing different locations and market characteristics throughout the country, and conducted market integration analysis, taking into account the effects of market arrivals on the prices.